Has anyone had luck using auction houses to buy deals?

13 Replies

Hey BP!

I am a part-time Real Estate Investor out of Baltimore. I was just curious if any of you had  luck using auction houses such as Alex Cooper or Hudson and Marshall to find your deals. I've always wanted to attend an auction but they seem to be scheduled during the week at an obscure time where I wouldn't be able to easily leave the office. I would be more motivated to attend if there are other investors on here doing it successfully.

For those of you using auction companies, do you have any tips and tricks for a first time bidder?

@Gabriel Ehrlich - We have gone to a few locally and in general have found that they tend to get a higher price than we'd offer for an investment.  You will find some investors there but also people looking for a deal for a home for themselves.  We haven't found a deal this way, but at the last private (non-foreclosure) auction, a local rental company bought three or four houses that we were also interested in purchasing.  All that to say is keep an eye on the auctions. There might be  deal worth getting out for!

Hi Gabriel! I have done it online with hubzu (Ocwen) and xome.com (Mr Cooper or Nationsbank I think). Both are clearing houses. In a nutshell, inspect the properties before bid. Some are only minor damage some need to be scraped. You normally have about 48 hours to come up with earnest money and roughly 3 weeks later the whole deal. Hard or private money or a big bankroll. Haven't done the courthouse steps but the online thing is a bidding thing and you can stop when you reach your limit. There's also auction.com and, I believe, several others out there. Seller contracts have removed most buyer protection that would be in a regular contract, but if you look at property and are happy then it can be a good deal. Working on one now that would cost about 35% of retail ARV. Keep your fingers crossed!

@Elizabeth Wilson I’ve heard of similar experiences from people I’ve networked with. Apparently the auctions cause a “feeding frenzy” in most cases. But I guess sometimes you can get lucky like @Harris Smith and find a winner at a good price! Harris Smith so you have any tips that you have found made you more successful when bidding or attending auctions?

The other scary part that I forgot to mention about some of these deals I’m seeing, is they are occupied meaning there’s no way to actually see the interior!

I have purchased a home at an in person auction from Hudson and Marshall before and it was an ok process.  It was over 8 years ago though so I am not sure how things have changed.  

@Gabriel Ehrlich There are definitely deals out there.  Some are dead in the water with the lender basically just going through the formalities, but there are deals.

Both auction houses you mentioned handle foreclosures as well as owner sales. Be aware of what type of transaction you are participating in. 

Occupied properties are usually foreclosures. Bidders need to factor obtaining possession post-sale as well as unknown condition into their numbers. 

With owner auction sales bidders can typically walk through prior to sale.

Originally posted by @Nathan G. :

Auctioneers (at least in my area) will accept offers before it goes to auction. I manage a few rentals for owners that bought this way. The properties were listed for auction on a specific date but they made offers to the auctioneer before it ever hit the block.

Pre-auction sales are wonderful. Everybody wins.

This is not possible in the foreclosure scenario. 

Originally posted by @Nathan G. :

@Tom Gimer I thought his question was referring to a general auction, not a foreclosure sale. Sorry if I misunderstood the question.

You really can't tell from his question but since Alex Cooper is one of the top 3 foreclosure auctioneers in this area OP needs to factor transaction type into his analysis.

@Tom Gimer That's another element that seems like it could be a big headache... Removing the previous owner from the house. Unfortunately, it seems like the best deals that come up are usually occupied which makes sense considering the extra hassle of getting the previous occupant out.

@Nathan G. I've bid on pre-auction houses before that landed on the MLS but my agent handled it. That's a good tip though, I'll need to check out some of these houses to see if pre-auction bids are accepted.

@James W. Glad you had some luck with it... In my head I picture it to look a lot like an auction on the show "Storage Wars"  How was your experience? were you able to actually visit any of the properties? did they remove the occupants once you closed (assuming it was occupied?)

The auction I went to was a while back, but it was scheduled in a conference room at a Marriott hotel.  I believe they were all bank owned properties at the auction I went to.

I registered to get a bidder number and I would say it was similar to what you would expect for an in person auction. They simply put the picture and address on the screen and opened it up for live bidding.  People held up their numbers to get acknowledged until the bidding stopped.  At the end, I went back with their representative and filled out a purchase agreement to purchase the property based on the bid and it was sent off to the bank for acceptance.  

There was a premium that I paid as the buyer but I couldn't remember exactly what it was.  I think it was a few percent of the purchase price if I remember correctly.  My offer was accepted and is closed in a month or so.  The process was fairly smooth.

I have purchased through Hudson and Marshall.  Was a live auction in a ballroom, believe it was on the weekend.  When purchasing these there are usually limited times for viewing and as mentioned, a buyers premium.  In my instance I purchased a house sight unseen but I knew the area well.  Worked out very good on our end.  We expected a lot of work to find out it had new carpet, paint, and 2 new appliances.

There were several houses in the action I was interested in but they went a little higher than I wanted to pay for being sight unseen.  Set your prices before you go there, don't let your nerves and the excitement change you from your price.  That being said I paid $5k over my predetermined "max price" :)

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.