Competing with professionals at auction.

9 Replies

How do I deal with the professional investors at the local auctions - Southbay, Los Angeles. 

How should I expect the so called 7-Angels to react to my bidding and would i have a better chance of success buying from one of them directly shortly after the auction (or something to that effect)?

Thanks

some times that can work they may take a quick flip price.

or you just put up your best bid and hope you get it... pretty tough to compete against the big players as they will run on lower margins since they are doing volume and probably can rehab cheaper etc etc.. they may have in house RE brokers for their listings.

when I was active in PDX market and one of the top 3 buyers... I had my own RE company so I listed all my own.. and I had my own crews that were employee's so hard for others to compete with me on the buy side when I save 3 to 6 % on resale fee's and could rehab for 20 to 30% less than others who had to hire it all out...

I don't know how tough these guys are on newbies coming in.. because there is usually anewbie or 10 at each sale..But one crew I knew up in Clark county WA..(Vancouver )  would actually buy a property for no profit if it meant trying to discourage you and get you to leave.. I went head to head with them.. but then when they knew I was not leaving and I had as much if not more purchasing power then they did.. we ended up partnering up on everything and that was great I just supplied money they did all th e work we split profits prorata to our invested dollar .. did that for 5 years.

You compete with money. Doesn't matter how "big" the player is, if you have the money to buy it, you are on a level playing field. Is some yahoo going to buy it knowing they will make nothing on it just to discourage you from bidding? Maybe. Let them do that a few times and have fun with it and see how big of a player they remain after a while.

Bigger players work on scale of economy. As others point out, they may have more money, cheaper money, better vendors/contractors to do better, faster work cheaper but, if you are a mom and pop player with the intent of buying at the courthouse steps and you have the money to do it, go for it. They have no more say so or leverage than you, if you can match them dollar for dollar and leave your emotions in the car. Use your head and buy on logic.

There are a group of "angels" (I'm being sarcastic here and in no way inferring the OTHER angels you refer to are in any way similar) up in Northern California that typically used to bid on foreclosure sales. They all got together one day and said, "hey, you keep bidding me up, how about I agree not to bid you up on this sale, if on a future sale, you agree not to bid me up". They thought it was a great idea and got together to see who would get to bid on a particular property at a particular auction, on a particular day. The only problem was, it was ilegal.

Again, i'm not saying a group of people can't buy foreclosures by bidding at auction and, i'm not saying that they can't turn around and sell it right after, I'm saying that one needs to be careful as it relates to bidding at public auction. Anything done to discourage someone from bidding on a sale can be viewed as improper.

Here is the link.

http://www.justice.gov/opa/pr/northern-california-real-estate-investor-indicted-bid-rigging-and-fraud-conspiracies-public

@Ron S.   collusion at bidding was rampant in Oregon.. but as more money came in and more out of area bidders it went away.

what is more common is just teaming up.

what we did is created an LLC with about 10 of us.... and if you had money to bid that day you wrote a check after the sale.. the LLC bought all the properties. That is perfectly legal.

But the walk away money.. the lunch money the you pass on this one and I will pass on the next one that is collusion and bid rigging as you point out.

locals can be pretty snarky protecting their turf don't kid yourself.

I can not play with the Hedge Funds (my pockets aren't that deep) so decided I would concentrate on homes that did not fit their criteria.  I also went to other areas that they were not concentrating on which means I need to drive about 1-2 hrs for a deal but well worth it.  Once the market calms down I'll head back over to my target market.

@Jared Bockoff Set your max and do not go over it.  If properties are being bid up I would concentrate on another area.

The problem when bidding at live or online auctions is that you are competing with real big pockets. Hedge fund, REITs and other institutional money are many times buying to hold, and don't have to justify bad single investments to all individual investors. It's the year-to-year that matters so they can buy at higher prices than you. Additionally they have more resources, such as cheaper sources of materials and labor, since they have their people on staff and buy in bulk.

It's not easy to win a bidding frenzy. You could end up not breaking even on the deal just because you just wanted to win something and make it worth your time. Most proficient investors I know, who have been flipping and occasionally holding for decades, don't ever try auctions. If you do, best of luck, and please let us know how it goes!

I agree with everything @Jay Hinrichs is saying, listing to Jay!!

in regards to buying from them directly I wouldn't think that is a good idea if you are also trying to rehab one of these properties.

Most of these investors are buying and flipping, unless you are looking for a newly remodeled home at top dollar it doesn't sound like the best option, but it really depends on what you are looking for and what you would like to do with it.

It also depends on your margins, at the end of the day if the numbers work they work , if they don't then pass. If you can pick up a property from one of these investors prior to them rehabbing it and charging you top dollar and can still meet your profit margins then do it.

In regards to competing with the "big players" at the auction, listing to @Jay Hinrichs

Originally posted by @Jared Bockoff :

How do I deal with the professional investors at the local auctions - Southbay, Los Angeles. 

How should I expect the so called 7-Angels to react to my bidding and would i have a better chance of success buying from one of them directly shortly after the auction (or something to that effect)?

Thanks

Hello and welcome!  You should go to watch the first one to get use to how everything goes.  I would recommend you do your prices anyway and maybe think about what you would bid.  Get to know the successful bidders.  Just ask them if they would consider you.  I am 59 years old.  I graduated from college and got my broker license in 1980. I have been in the construction business since I was 17.  If you think I can be any help to you please contact me at any time.  I found BP about 3 months ago and I am still learning. Good luck!