Buying Through Auction : Rule Of Thumbs ?

Question

What are helpful rule of thumbs for buying through auctions ?

Since you cant get inside the house; does anyone have any formulas they use to help calculate a bidding price assuming the only "known" is after repair value.

Christopher Gilbert · Answer

Rule #1: Do a thorough lien search.  The majority of properties at auction can have multiple liens attached to them.  Some get dismissed based on the county auction rules and so stick no matter what to the property which means you have to settle them.  Work with a title company if you cannot get access to all of the local databases that you need.

Rule #2:  At least do a drive by of the property and if it is vacant look in the windows, etc. and get as much info as you can.  Chances are if the property is vacant then someone has already "found" a way in and you should be able to get a good look throughout.  If it is occupied, we have had a lot of success paying the person there $50 to do a 10 minute walk through.  Most people are willing to make an easy $50, just remember to be respectful of their situation.

In our area there is a lot of competition at the auctions and it is not uncommon to see properties bid up to almost ARV and then adding repairs does not give you much margin to play with so any mistakes can cost you big time.

We usually start with ARV from comps and then back out repair estimates and then the margin that we want to make.  This gives us our max bid for each property.