Foreclosure Auction Strategy

5 Replies

I am interested in purchasing a Foreclosure on an Online Auction website. The auction goes on for 5 days and if the reserve is met, the home goes to the highest bidder. I am wondering what the typical strategy for these auctions? Whether all the action happens in the last 5 minutes, or whether it is more calculated. The home is listed at 224k, but starting opening bid was 118k, and no action since, does this have indication of events to come? 

Thanks for the help!

In my experience with online auctions, more than likely, the reserve price is the list price. Yes, the last 5 minutes will be the most important, but if no one bids close to what they want (probably market value) then it will cancel, and the agent will then have the ability to contact you directly to negotiate. Real estate agents actually use online auctions to drive up a price by bidding war, as opposed to courthouse step foreclosure auctions that can be good deals. Unless I am mistaken, I think you also have to pay 5% commissions on the winning bid in the online auctions. Auctions like that are not great places to find deals. 

I work with investors buying at auction all the time.  What site is the property listed on?  I do know that most of the action does tend to come in the final hour.  You just need to do your due diligence and know what your top bid would be.  Don't let yourself get caught up in the action and bid more than what you think it is worth.  Good luck!

Thanks for the responses! 

It is on HomeSearch, and I have taken the 5% commission into consideration for my analysis. 

Jeff- If the list price is the reserve, then it will be hard for anyone to make money on this property. I have feeling you are right, but hoping there is no reserve. 

Good luck Jonathan! (Hey isn't that the name of the Nigerian President?!) I hope I am wrong, but I believe I once bid on a property through Homesearch and I found it to be as I state above. Another good indicator is whether or not they offer financing on the deal. it's hard to beat out retail buyers if financing is an option.  

I only bid on auctions where the property is non-fanciable (cash) and without an auction fee.  The homes need more work but should eliminate most retail buyers.  

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