Foreclosure Auctions - worth it?
Member since 2022 · 4 posts · 1 vote
I'm still surveryin my options as I'm about to get into my first rental property. I live in south Florida where everything is pricey and I've heard of people going to auctions to buy homes that were foreclosed. What is the benefit and downsides of this? What does someone need to know before going into an auction? How much can you know about the property before you purchase it? What are the buying terms like?
Hey Cristian,
I've heard mixed opinions on foreclosure auctions. The biggest thing is knowing what you're getting into before showing up. Auctions can move quickly, you typically need to have your financing or cash situation figured out ahead of time, and you may not have the same level of due diligence or access to the property that you would with a normal purchase.
A lot of newer investors get attracted to auctions because they hear about the potential discounts, but the discount usually comes with added risk. You need to understand the local process, timelines, title issues, liens, occupancy situations, and what happens after you win the bid. The logistics alone can catch people off guard.
If this is your first rental, I'd also think about what your overall strategy is. Are you looking to BRRRR, house hack, buy and hold, or something else? The right approach can change depending on your goals, risk tolerance, and how involved you want to be in the process.
Best of luck, and feel free to reach out if you have any more questions - my DMs are always open!
Hey Cristian,
I've heard mixed opinions on foreclosure auctions. The biggest thing is knowing what you're getting into before showing up. Auctions can move quickly, you typically need to have your financing or cash situation figured out ahead of time, and you may not have the same level of due diligence or access to the property that you would with a normal purchase.
A lot of newer investors get attracted to auctions because they hear about the potential discounts, but the discount usually comes with added risk. You need to understand the local process, timelines, title issues, liens, occupancy situations, and what happens after you win the bid. The logistics alone can catch people off guard.
If this is your first rental, I'd also think about what your overall strategy is. Are you looking to BRRRR, house hack, buy and hold, or something else? The right approach can change depending on your goals, risk tolerance, and how involved you want to be in the process.
Best of luck, and feel free to reach out if you have any more questions - my DMs are always open!
In the middle of closing on my first foreclosure auction purchase, so I'll have a better understanding in a couple of months when i sell ( hopefully)!
I can't speak to Florida but the upside is that sometimes you can find unbelievable deals. The cons is that its super easy to be out on your butt if you miss a word while doing your due diligence/title search. Its very time consuming to do your due diligence compared to buying wholesale or on the MLS.
Never buy a property without doing your due diligence. The amount of properties that go up that have unextinguishable liens or is a situation where you've bought the second mortgage and not the first is... quite a lot. Probably 15% of those going for sale this month in my state are a 2nd mortgage or an HOA case that is junior to the main mortgage. So its not like its a one off thing. Its pretty common and you have to know how to distinguish between the two.
Depending on the state, before going to auction you need to ensure the property owners/heirs were served and that the correct judicial process was followed. You need to ensure that there are no liens on the property ( or that you know you can handle extinguishing the liens or dealing with a quiet title). You also need to know if youre bidding on a 1st mortgage, 2nd mortgage, HOA, etc. Once i confirm those items, Ill add it to my preliminary list.
Typically you dont know anything about the property condition other than what you can see on the outside. I personally never bid on something until I've driven by in the past 7 days. Theres been multiple properties that I've seen where the recent Google Map view was fine but the property was burned down or had a murder on it. You can sometimes luck out and see historical interior pictures online from the previous time they sold but beware that there very well could have been a kitchen fire, pipe burst, etc, occur since the photos were taken. I typically assume a gut reno when I run my numbers lol.
As for buying terms its up to the state / county but typically in my area its you have to have 5% in cash/cashiers check at auction and then wire the rest within 30 days. You can't just call up a mortage lender - you need to have cash or creative financing. Youll get a foreclosure/sheriffs deed, not a general warranty deed and the property is as-is and is not guaranteed to be vacant. So assume youll have to go through an ejection lawsuit as well.
TDLR - Super time intensive and risky but there are diamonds in the rough for sure you just gotta do your due diligence to protect yourself from the property becoming a ( and I cannot stress this enough) huge liability. But not impossible to find a good deal.
In the middle of closing on my first foreclosure auction purchase, so I'll have a better understanding in a couple of months when i sell ( hopefully)!
I can't speak to Florida but the upside is that sometimes you can find unbelievable deals. The cons is that its super easy to be out on your butt if you miss a word while doing your due diligence/title search. Its very time consuming to do your due diligence compared to buying wholesale or on the MLS.
Never buy a property without doing your due diligence. The amount of properties that go up that have unextinguishable liens or is a situation where you've bought the second mortgage and not the first is... quite a lot. Probably 15% of those going for sale this month in my state are a 2nd mortgage or an HOA case that is junior to the main mortgage. So its not like its a one off thing. Its pretty common and you have to know how to distinguish between the two.
Depending on the state, before going to auction you need to ensure the property owners/heirs were served and that the correct judicial process was followed. You need to ensure that there are no liens on the property ( or that you know you can handle extinguishing the liens or dealing with a quiet title). You also need to know if youre bidding on a 1st mortgage, 2nd mortgage, HOA, etc. Once i confirm those items, Ill add it to my preliminary list.
Typically you dont know anything about the property condition other than what you can see on the outside. I personally never bid on something until I've driven by in the past 7 days. Theres been multiple properties that I've seen where the recent Google Map view was fine but the property was burned down or had a murder on it. You can sometimes luck out and see historical interior pictures online from the previous time they sold but beware that there very well could have been a kitchen fire, pipe burst, etc, occur since the photos were taken. I typically assume a gut reno when I run my numbers lol.
As for buying terms its up to the state / county but typically in my area its you have to have 5% in cash/cashiers check at auction and then wire the rest within 30 days. You can't just call up a mortage lender - you need to have cash or creative financing. Youll get a foreclosure/sheriffs deed, not a general warranty deed and the property is as-is and is not guaranteed to be vacant. So assume youll have to go through an ejection lawsuit as well.
TDLR - Super time intensive and risky but there are diamonds in the rough for sure you just gotta do your due diligence to protect yourself from the property becoming a ( and I cannot stress this enough) huge liability. But not impossible to find a good deal.
@Mary-Kate Scurlock vey curious how this has been going for you so far since your original response was 2 months ago?
I'm still surveryin my options as I'm about to get into my first rental property. I live in south Florida where everything is pricey and I've heard of people going to auctions to buy homes that were foreclosed. What is the benefit and downsides of this? What does someone need to know before going into an auction? How much can you know about the property before you purchase it? What are the buying terms like?
Great questions. Foreclosure auctions can offer opportunities to buy properties below market value, but they also come with risks.
The biggest challenges are limited property access, buying “as-is,” possible liens, and having to move quickly with your due diligence and financing. Before bidding, investors should research the property history, title, taxes, comparable values, and have a clear exit strategy.
Auctions can be rewarding, but success comes from knowing your numbers and understanding the risks before placing a bid.
Hey Mary-Kate , your Foreclosure journey is really interesting, what state are you located in?
I'm still surveryin my options as I'm about to get into my first rental property. I live in south Florida where everything is pricey and I've heard of people going to auctions to buy homes that were foreclosed. What is the benefit and downsides of this? What does someone need to know before going into an auction? How much can you know about the property before you purchase it? What are the buying terms like?
@Cristian Centeno
Foreclosure auctions can be a great source of deals, but they usually require more preparation than a traditional purchase. I'd spend time understanding the auction rules, title issues, occupancy risks, and whether you'll have an opportunity to inspect the property beforehand. The more due diligence you can do before bidding, the fewer surprises you'll have after closing. Best of luck with your first rental!
The upside is price, but most of that discount is just payment for risk: you usually cannot see the inside before you bid, you need cash or hard money within 24 hours to a few days, and the place can come with occupants you have to evict. The single thing that separates people who do fine from people who get wrecked is running a title search on every property before bidding, because if you buy at a junior lien foreclosure the senior mortgage survives the sale and you inherit it. Go watch two or three auctions in your county without bidding and track what things actually sell for versus the opening bid, then compare that to ARV minus repairs to see if the margin is even there.
@Cristian Centeno I'm in Coral Springs, so here are the Broward specifics for your questions.
**Buying terms.** Broward runs two online auctions with very tight payment windows (from the county auction FAQs):
- Mortgage foreclosures (broward.realforeclose.com): 5% nonrefundable deposit, then the balance plus the court registry fee by 12:00 p.m. ET the next business day.
- Tax deeds (broward.realtaxdeed.com): deposit is the greater of $200 or 5%, posted by 4:30 p.m. ET the Thursday before the sale. The balance, recording fees and doc stamps are due by 11:00 a.m. ET the next business day.
So it's effectively cash, or a line that's already approved. A normal mortgage can't close that fast.
**How much can you know before you buy?** Everything that's public record, and nothing about the inside. You can get:
- The Property Appraiser record: use, size, year built, value, every deed since the last sale.
- Official Records: mortgages, judgments, HOA claims of lien, code liens, lis pendens, plus any releases.
- The case docket (for foreclosures) and the city's code cases.
You usually can't get interior condition or occupancy. A drive-by is about it.
**The trap.** Both FAQs say the sale does not erase all other liens, and you take title "subject to all defects, liens, encumbrances." In a foreclosure, what gets wiped depends on who's foreclosing. If the plaintiff is an HOA or a second mortgage, the first mortgage generally survives and you buy subject to it. Read the final judgment and the plaintiff's name first.
**A real example from the Oct 26 Broward tax deed list:** 4001 NW 78 Terrace #N & S in Coral Springs (parcel 4841-14-01-2120). The opening bid is $50,865.05. The Property Appraiser shows multifamily (under 10 units), built 1972, a 2026 just value of $595,870, and a last sale in 2015 for $150,000. On paper that's a big gap. But for a first rental, the questions are: are tenants in place (and on what leases)? Are there Coral Springs code liens or open cases? And will anyone redeem before the sale? When I checked today, 3 lots on the Oct 26 list had already moved to "Closed or Canceled."
Can I recommend a book which deals totally with this subject and has really helped me in the Foreclosure buying process, "Before You BId" by Damon Simon.
Good luck!