Birmingham, AL · Member since 2016 · 21 posts · 3 votes
So, the title really says it all. Am i wasting my time looking at foreclosure properties? I get that some properties can sell for much less, but just for the sake of this discussion, I'm referring to foreclosures that are 100k+. I was driving around a neighborhood yesterday that i have been keeping my eye on, and finally i stumbled across a house that was in the process of being foreclosed on. The average home price in the neighborhood is around 120k. I got all excited and contacted a Foreclosure attorney only to find out that payment must be made in full within 24 hours.
So as someone who does not have access to 100k+, do i have options here? Perhaps I'm in the wrong circle of friends , but i do not know anyone who has access to that kind of money and would be able to purchase a house outright. I work two jobs and make 60k a year and even if i made 100k a year its still hard to believe i could save up 100k + in cash. The only suggestion i have heard is using a hard money lender and since i was hoping to live in the property for a while, i was assuming that that type of higher interest loan would not make sense. Is it possible to use a hard money lender to get the property initially and then somehow transfer to a more long term sustainable loan? Or should i just forget about foreclosures all together and go find a property that will allow regular financing?
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
9y
@Wes Peters, buying at foreclosure auctions isn't necessarily for the rich, but it's definitely for the professionals. It's laden with risks as many other posts have pointed out, and the casual buyer can be wiped out by a simple mistake where the professional can more likely absorb the hit.
In the 20+ years I've been attending foreclosure auctions I can count on my fingers and toes the number of times I've seen a property sell to a buyer intending to occupy. Folks that have $100K (or here in CA maybe $500K or more) in cash to spend on a house don't want to buy a house sight-unseen (at least on the inside), take on title risk, endure endless sale postponements and cancellations, take on an unknown amount of repairs, deal with foreclosed-out occupants, etc and do all of that just to find out, once inside, that they don't like the floor plan or that the neighbor's dog barks endlessly at night (remember, there are no transfer disclosures in foreclosure auctions!). The 20% discount isn't worth the trouble. They have the money so they buy properties the conventional way.
It's true that you can buy at auctions with a funding partner. I've bought hundreds of millions of dollars of real estate with funding partners. But every transaction had a business plan, whether that was to buy, fix up and resell or buy and rent out and hold for future resale. Buying with a funding partner for a personal residence is most likely a non-starter. There's no business plan, no exit strategy. The only way I've seen this work is for family members to help out with some cash to get you into a house. And those family members probably don't want to take on auction risks.
@Jay Hinrichs, auction.com started holding trustee's sales in CA a few years ago. Worst thing to ever happen to this business. They use their star power, as you said, to attract all sorts of folks that know nothing about the risks and they attempt to sanitize the business by making it appear to be an auction suitable for the uninformed. To make matters worse, they cram all of their sales into one day instead of what everybody else does which is to spread them out all throughout the week. This means that you have to do tons of prep work for an 80 house auction in one day instead of 8 houses per day for two weeks which makes the workload difficult to manage. And worse yet, they post fake opening bids on houses they know are going to postpone and fake low opening bids on houses they are going to auction just to stir up attendance. Then, once everyone is there, they postpone most of them and then jack up the opening bids on the ones they are selling. It's really frustrating and makes the whole thing a total waste of time for the pros.
@Diane G., you can't trust the auction's website where it says "owner occupied". They have no way of knowing who is in the house. It could be the owner, in which case they can be served a 3-day notice to quit after the sale deed is recorded and can be evicted through the courts/sheriff if they don't abide by the 3-day notice. But it could also be a tenant, and if it is, they are protected by the Protecting Tenants in Foreclosure Act which specifies that they must be served with a 90-day notice to quit, and if they have a lease for a fixed term, the lease has to be honored. In other words if they have 6 months left on a one-year lease you can't serve them notice for 6 months. I don't buy at auction in San Francisco so for properties located there I'd get some legal advice on how the just cause eviction ordinance effects evictions post-foreclosure.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Diane G. its quite simple... its an auction on their site.. if it was a true foreclosure sale you would have to chase them down with a company like Property radar ( which is awesome by the way)
and or follow them in the legal publications.. true courthouse steps are not published on the auction .com site.. those are all after market. at least that's what I think.
@Brian Burke Brian is the expert here in CA foreclosures having bought well I don't know probably over a 1000 of them... I am the man in Oregon and Washington and have bought many in CA but that was back in the 70s and 80s before I decamped for greener pastures ( literally).. And we don't partake in courthouse in CA.. dollars are too big for us.. and competition is keen.. you need to be vertically integrated like Brians company. Plus I think Brian created a proprietary software to chase these.. you literally have to track 50 to 100 sales to buy 1... you cannot hone in on just one property.. the chances you would buy it would be next to zero.
But again these are Post foreclosure deals on Auction.com and they are open to bidding from all. however just know you have some crazy money chasing this stuff.
we are successful in secondary and tertiary markets.. were are competition is the wanna bee wholesalers you see all over BP those with no money and no experience.. they have to post money to bid and the EM deposits are usually 5 to 10k per.. So of course that's walk around money in SF but out east and mid west it separates most of the wanna bees and leaves some nice deals for those that actually have cash and can transact.
As a side note I would if I was you defiantly take a call with Brian's team and learn about the deals he is doing in CA right now.. I personally invested in one... I think its brilliant model... I don't have a financial interest in his company and receive no compensation so I can tout it on BP without getting in trouble with the mods... He is in Santa Rosa would be well worth you time given the cash you have to invest with.. nice to diversify some.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Diane G. again check with Brian on this.. but holdover owners .. do not have the same landlord rights as normal tenants.... I know in Oregon and Washington we evict them straight away if they won't move willingly.. the risk you take is damage theft etc etc.
Any one who has bought any number of these that had owners in them has suffered this.. right down to by the time you get possession the house is stripped.. I have had them completely stripped.. cabinets all fixtures appliances heater water heater condenser everything
Investor · Truckee, CA · Member since 2013 · 546 posts · 445 votes
9y
@Jay Hinrichs - I'm running out the door, so only took a quick look, but that auction.com property actually appears to be a trustee sale. In CA auction.com has expanded into the trustee sale business as well as REO's. Makes things a little confusing at times.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Maxwell Lee can't buy your way in you have to transact and buy in volume.... along with you can't bid then bail.. you do that more than a few times they drop you. so if you bid and win you better close
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Sean OToole well the one thing I know I was correct about is that Property Radar is Awesome !!! made me about 600k on one deal this year... so for that I am for ever grateful to that app.... :)
Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
9y
@Jay Hinrichs Thanks for the reply. I've been following you on BP for awhile so well aware of your volume lol. We are nowhere near that size, but I definitely close when I win. I wouldn't bid unless I wanted to close, and I would close if I wanted to close. ;)
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Maxwell Lee hit me off line maybe you can join my team ... I don't mean I have to be involved with your deals.. you can just use my volume to get ahead of the competition there.. you would owe me dinner and a fine bottle of wine is all next time I am in FLA we buy in Orlando so no conflict with you
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
9y
@Wes Peters, buying at foreclosure auctions isn't necessarily for the rich, but it's definitely for the professionals. It's laden with risks as many other posts have pointed out, and the casual buyer can be wiped out by a simple mistake where the professional can more likely absorb the hit.
In the 20+ years I've been attending foreclosure auctions I can count on my fingers and toes the number of times I've seen a property sell to a buyer intending to occupy. Folks that have $100K (or here in CA maybe $500K or more) in cash to spend on a house don't want to buy a house sight-unseen (at least on the inside), take on title risk, endure endless sale postponements and cancellations, take on an unknown amount of repairs, deal with foreclosed-out occupants, etc and do all of that just to find out, once inside, that they don't like the floor plan or that the neighbor's dog barks endlessly at night (remember, there are no transfer disclosures in foreclosure auctions!). The 20% discount isn't worth the trouble. They have the money so they buy properties the conventional way.
It's true that you can buy at auctions with a funding partner. I've bought hundreds of millions of dollars of real estate with funding partners. But every transaction had a business plan, whether that was to buy, fix up and resell or buy and rent out and hold for future resale. Buying with a funding partner for a personal residence is most likely a non-starter. There's no business plan, no exit strategy. The only way I've seen this work is for family members to help out with some cash to get you into a house. And those family members probably don't want to take on auction risks.
@Jay Hinrichs, auction.com started holding trustee's sales in CA a few years ago. Worst thing to ever happen to this business. They use their star power, as you said, to attract all sorts of folks that know nothing about the risks and they attempt to sanitize the business by making it appear to be an auction suitable for the uninformed. To make matters worse, they cram all of their sales into one day instead of what everybody else does which is to spread them out all throughout the week. This means that you have to do tons of prep work for an 80 house auction in one day instead of 8 houses per day for two weeks which makes the workload difficult to manage. And worse yet, they post fake opening bids on houses they know are going to postpone and fake low opening bids on houses they are going to auction just to stir up attendance. Then, once everyone is there, they postpone most of them and then jack up the opening bids on the ones they are selling. It's really frustrating and makes the whole thing a total waste of time for the pros.
@Diane G., you can't trust the auction's website where it says "owner occupied". They have no way of knowing who is in the house. It could be the owner, in which case they can be served a 3-day notice to quit after the sale deed is recorded and can be evicted through the courts/sheriff if they don't abide by the 3-day notice. But it could also be a tenant, and if it is, they are protected by the Protecting Tenants in Foreclosure Act which specifies that they must be served with a 90-day notice to quit, and if they have a lease for a fixed term, the lease has to be honored. In other words if they have 6 months left on a one-year lease you can't serve them notice for 6 months. I don't buy at auction in San Francisco so for properties located there I'd get some legal advice on how the just cause eviction ordinance effects evictions post-foreclosure.
where did you see it say trustee sale? and what does that really mean by the way???
On this one, if it is owner occupied, yes, you can evict him right away... BUT let's say he signs a lease with a "tenant" on the eve of moving out, at $50.5 a month, the new owner will be stuck with that rate for a year.... New owner can't evict the teanant and has to wait 12 months to raise the rent, and large increase might run into some interference from Rent Board of the city.... So risk there... The new owner can easily be out $50K to $60K just due to that...
That is why i see $500K as about the fair value given there is no guanrantee that it will be handed over vacant...
But I dont have the money now, so not my problem this time... Lol
Real Estate Agent · Ankeny IA · Member since 2015 · 89 posts · 34 votes
9y
many options out there for you to purchase foreclosures. I use commercial lending and purchase forclosures as all cash offers. Only contingency I use is termite inspection and appraisal. Outside of that the bank allows me to use cash offers with a 10 business day close. Read the fine print on your forclosures. I'm sure there is more than 24 hrs that might just be proof of funds letter
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Brian Burke yes B ham just switched and the local good ole boys are having fits.. LOL but we are getting two to four a month.. but its little dollars compared to West cosat that's for sure. and there is a one year right of redemption but you can buy a redemption bond.... no one redeems in those areas.
were its wild is here in Oregon with the redemption rights... I had lunch with a buddy of mine yesterday and he has bought hundreds of rights.. and was in the process of redeeming one this week.
so if you look at it from the person who spent all the time effort etc. and won at the trustee sale.. then comes to find out there is this little thing called redemption rights... and now they will not get the property they will get their money back and 9% interest.. they are not happy. LOL
I have seen folks buy and then fully remodel not knowing about redemption rights only to have the home redeemed and they lose their rehab money. your only entitle to funds expended to keep the property safe.. and a new kitchen and bath rooms and paint carpet is not included.
when I was buying sherrif sales in Atlanta in 2012 its once a month there.. it takes a team to cover them all... 6 or 7 criers show up.. and they come between 10 and 2 or so... and they all start crying at the same time.. talk about a circus
Brian - I post mine before seeing yours... You and I are thinking about the same thing here.... What if there is a tenant? what if the owner signed a 10 year fixed rate lease with the "tenant" who is his wife, or his cousin???
A few things ago, this exact same thing happened in San Francisco, but I did not follow the whole story and do not know the end story... But the owner signed a 10 year flat lease with a relative, and the new owner took them to court.... Not sure how that story ended.... Lol
Investor · Santa Rosa, CA · Member since 2012 · 2k+ posts · 7k+ votes
9y
@Diane G., the act applies to a "bona fide tenant" who is leasing at market rate. Those fake $50/mo leases wouldn't hold up in court. But if it was only slightly below market it could be a real battle and it would be up to the judge, and you never know how that would turn out. Thus I always preach that buying at foreclosure auctions isn't for the casual buyer. Too many unknown risks for the one-off folks. Do it in volume and you can make more on the winners than you lose on the losers.
I had one about six years ago where the owner had deeded the property to a friend and then conspired with the friend to draft up a fake ten year lease that was all prepaid by way of her "selling" the house to him at a $500K discount. She wanted to say that we had to honor the lease. This didn't work out so well because she mistakenly cc'd me to the email in which she was concocting this plan with her co-conspirator so every time an attorney would pop up with this defense we'd show the email to her lawyer and they'd drop her as a client. Then another attorney would pop up and the process repeated. We got the eviction judgment but then she sued after the fact and after 5 years of litigation and a six-week jury trial we won, hands-down. But it cost my insurance company over $1 million to defend the suit. Foreclosures are buyer-beware.
what a story... Geesh....the biggest loser in this is that one stupid lawyer who agrees to represent her.... I am sure she did this on contingency basis, hoping the insurance company just want to settle and move on.... Lol
Investor · Truckee, CA · Member since 2013 · 546 posts · 445 votes
9y
@Diane G. - Like @Brian Burke said it has to be a real lease for fair market value. To prove that you need to be on your game though. Demand to see checks or even bank statements if you can. The folks pulling the scam have gotten pretty sophisticated, and it can be an uphill battle for sure. One of my customers just got a group that has been squatting and demanding cash for keys indicted by the DA after they tried to pull the scam on him 3 times in a row. He got them out of one his houses, and they literally packed up and went to another one of his houses and started moving in. Not a good move on their part - the cops were done playing nice with the "poor tenant" at that point.
PM me and I'd be happy to give you details on this particular property. We track all the trustee sales in CA, including all the postponements, etc. I took a quick look but this property was a little messy so I need to take a closer look when I have more time.
So for those of you constantly buying from auctions, since 59 out of 60 properties got canceled, postponed or whatever, do you go in reareached on all 60 properties, knowing 59 of researches will be wasted, or do you just skip due diligence and buy in bulk and hope to win some and lose some?
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Diane G. cant speak for others however Property Radar does a lot of the leg work for you ..
I was doing my courthouse steps prior to this app.
WE had good realtions with title company they would do a date down on each NOD when they first came out and put it on a spread sheet for me... updated daily in 3 counties.. however I owened a real estate company at the time and hardmoney lending company.. so I pushed a lot of volume through them and they went the extra mile for us.. its handled in customer service dept.
it can be done here on the west coast many states though NO way .. as title has to be researched by hand.. those folks have a much tougher time at it.
@ jay Hinrichs
Got it... thanks
I think it is hard to get anything at a below market price in Bay Area, especially those in A or even B locations, whether via foreclosure, or via the so called wholesales....
Those avenues work in other states, not so much here
