Tips for buying an owner occupied rural property at auction?

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Tips for buying an owner occupied rural property at auction?

Chris M.
Clearwater, FL · Member since 2016 · 44 posts · 3 votes

Been looking to purchase a rural property for a few weeks and found a pretty remote one but it’s being sold at auction.  I’m unfamiliar with properties sold at auction.   What should I know?  What are the potential dangers?  How to avoid them? Benefits to buying st auction etc?

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Nathan GesnerBusiness Member
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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
5y

First things first, you have to have cash on hand. If you bid $150,000 then they will expect you to pay that entire amount, usually within hours of winning the auction.

Second, you don't get time to investigate the property. Everything could look good on paper, then you find out the foundation is so bad that the entire thing needs to be torn down. Or the water used to irrigate the field was stolen from the neighbors and this property has no water rights. Or there are $350,000 in liens against it and now you owe far more than the property is worth.

It's not something you should go into without some serious education first.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    5y

    It depends on the Type of auction, if an REO, likely clear title....if the actual foreclosure auction, there are potential traps you need to know about.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y

    First things first, you have to have cash on hand. If you bid $150,000 then they will expect you to pay that entire amount, usually within hours of winning the auction.

    Second, you don't get time to investigate the property. Everything could look good on paper, then you find out the foundation is so bad that the entire thing needs to be torn down. Or the water used to irrigate the field was stolen from the neighbors and this property has no water rights. Or there are $350,000 in liens against it and now you owe far more than the property is worth.

    It's not something you should go into without some serious education first.

    The DIY Landlord Book4.7248 Reviews
    WebsiteView Page
    1Reply
  • Account Closed
    Member since 2020 · 983 posts · 1k+ votes
    5y

    Or...you think you purchased the property, but you purchased only the 2nd lien or mortgage. That has to hurt!

    Generally, when most properties are sold at auctions the junior liens are wiped out with the exception of IRS and maybe liens by the state for back taxes. But...if takes only one mistake to wipe out an investor. Most auctions will not tell you whether you are buying the first mortgage, 2nd, or whatever and this is scary. The last auction I went to was just before 2020 and I was bidding on a house. I noticed that a high roller at the auction did not bid on the house and this worried me. I think I was lucky when right in the middle of the bidding the auction announced that the sale of the house was cancelled. I worry about checking the title, find it is clear of junior liens and then some loan company or attorney records something I can't get out of just before the auction. 

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