There is an auction coming up for 4 pieces of land (buildable lots). I am looking to wholesale the deal. Secure it during the bidding process then assign it to a builder friend of mine. This isn't a typical wholesale deal and I don't know all the rules and regulations when it comes to auctions. Any advice on what may potentially happen or what to look out for would be greatly appreciated.
@Matthew Dovner At auction, you'll need to come with a cashiers check for a sizable amount of the purchase and then come up with the balance usually in a day or 2. Do you have a buyer you can assign it to immediately?
it states I have to put up 10k per lot. Then close in 30 days. I do have a builder lined up. Well they require proof of funds I wonder?
I'm no expert, but I have bought at auction once. In my case, I was using a commercial broker who was also an auctioneer, which helped because it was all very unfamiliar to me. If there is an auction company running the auction they should be able to send you all their relevant rules and info (such as whether you'd be able to assign the contract).
I would also want to be 1000% solid about your strategy and your end buyer because if you don't close you'll have 40k gone with the wind.
I'd suggest you not raise your hand or wave to anyone (LOL).
I'd get a future assignment agreement with a $10K deposit from that buyer or not buy it!
The buyer could get hit by a bus, be dead or totally incapacitated, it would be my luck, just saying, you can't be certain your buyer will or can perform and you're betting $10K he will or can. All he has to do is change his mind, a thousand things could cause him to change his mind.
No deal is done until it's closed and filed for record! :)
Matthew, what happens if your buyer fails to come through, and you can't close the deal? Are your deposits forfeited? Likely. I would read the rules for the auction carefully, and figure out if you're potentially exposing yourself (financially, that is. ha!)
Are they paper lots or fully developed? It's always helpful to see what fees have been paid. A check with the permit office is a must. Good luck.
@Matthew Dovner I don't want to sound like a wet blanket but there is a fair amount of risk buying at auction. You'll need to do your own title search and make sure there are no liens on the property. Clear title is not guaranteed at auction.
Matthew Dovner - I learned a long time ago to "never play the other man's game."
To me that means that if I'm playing for keeps in a game and I don't know who the patsy is ...it's me!
If you do insist on participating in the auction for those parcels, in most cases you'll be expected to pony up the dough quickly, maybe certified funds at the auction. You could become the proud owner of four lots with no real knowledge how to monetize the opportunity beyond your unsophisticated "assign it to a builder friend" play.
If you borrow the money from relatives or friends and the builder-friend play doesn't work out, you might become a builder with angry partners. On the other hand, you could also learn some expertise in land entitlements and development and one day post cautionary tales on discussion forums like BP.
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