Buying at foreclosure is EASY!!!!

Foreclosures
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Buying at foreclosure is EASY!!!!

Rich Weese
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes

B.S.!!!! It is easy to buy at the courthouse steps , just show up with cashiers checks and raise your hand!
However, it is also very easy to lose your shirt. I attend and buy at my Texas county foreclosure auction the first tuesday of each month. This is an open invitation to come watch a pro do it next tuesday the 5th. PM me if interested.
Here are a couple examples.
1. Last month, a newbie bid around 40K on a house worth probably 200K. Great deal, right? He hadn't done his homework!! (now it gets funny) It was for a SECOND mortgage that was for a swimming pool and landscaping on the 200K home the homeowner had taken out. This bidder had paid off the homeowners' pool loan. He gets nothing for his money, and the homeowner got a free pool!
2. A couple months ago, a guy bid around 40K for a 100K home and was high bidder. He had missed an IRS tax lien that was over 100K. He had to pay the lien or walk away. He walked.

I say this as a word of warning to all. I have a staff of 3 people doing the following, just to get ready for next tuesday. 21 days prior to sale, a lady goes to the courthouse and compiles the list of foreclosures due for auction.It takes her about 4 days. I purchase the list from her for $150. There are 109 pages and 652 homes this month. My staff then fans out. One begins checking a website for brs, baths, garage, square footage, yr built and lot size. Another begins researching taxes owed on another website. The third goes out and takes photos of the homes I've designated I'm interested in. 212 this month.
The info is then added to the list and re-sent to me as well as the photos. I then begin my chart of properties and match pics with the info. and determine my max price I'll pay. I eliminate some from viewing the photos for various reasons. I'm now under 200.This process takes about a week.
Once I have my list of 200 properties, I make arrangement with my photo person and I go with him to view each home, neighborhood, comps, and homes in area for sale or rent.I make adjustments to my price and add any changes I make notes on my list. Is home vacant, ramsacked, meth house next door, etc. My other 2 people are now researching any liens; i.e. judgements, child support, tax liens, etc. If they miss a single one, I may be screwed.This takes another week approx.
That brings me to today. I have to determine my bidget for this auction and order my cashiers checks. This month, I'll take approx a half million to buy properies. I just ordered 52 cashiers checks of varying amounts from 100 bucks to 50K.
Now I'm ready for the auction and the fun begins. In TX the auction is a 3 ring circus! It starts at 10 in the morning and you may have 2-3 trustees all selling their properties AT THE SAME TIME! You don't know the order properties will come up, or even if property you want, will come up at all. Bank may postpone the same, homeowner bails it out, or declares BK, etc.
Because there may be 3 trustees, each of my staff has a chart with my target prices and hangs out at a different trustee. We have to constantly communicate to make sure we don't exceed our budget- you must pay at conclusion of auction. I've done all this work and maybe not bought a single home. The most I've bought at 1 auction is 5.You also have to constantly know what denominations of cashiers checks you've spent. No change is given for overpayments for weeks, and you must pay for each home separately.
If you get one, then you go , after the auction to see what you bought! If there are people in the home, you go to the door and chat. Some won't be happy, and some won't even know what happened. I've bought homes where there was a tenant. Owners had been collecting the rent and not paying mortgage. Tenant wasn't aware. You have to post the eviction notice and get the folks out.
Finally, after their departure, you get in the house and see what you have. I have a 2 man crew to do the repairs, painting landscape etc. The home is repaired and you're ready to sell. Except, by the time all this is done, the market has changed and loans are no longer available! Now , you either rent it out or continue carrying the home while you try to find a buyer. Doesn't all this sound fun?
I'm posting this to help save aggravation in would be auction buyers. It is not for the faint at heart. I've invited all BP members to come watch and I mean it. If interested, PM me. I'll be attempting to buy. May 5th, at 10 am in Hidalgo county TX. I buy here because it has been rated # 1 for appreciation for 3 years running by many sources. Maybe I'll see you here! Rich

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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
16y
Originally posted by Rich Weese:
...if you just want to buy from the bank that overpaid for the home to begin with at the foreclosure sale! Think about it. If the bank ends up with their bid WINNING, it means no one else was willing to pay more.


For other who may not be familiar with the process (I'm sure Rich realizes this), this isn't completely accurate...

For example, let's say a property is selling at a foreclosure auction with the bank bidding $100K (this means nobody can buy the property for less than that). And let's say that nobody is willing to bid above $100K, so the bank gets the house back.

While it may be true that the bank's purchase price of $100K wasn't a very good deal (as Rich pointed out, the bank "overpaid" for it at $100K), that doesn't mean that investors won't have the option of picking the house up as an REO for much less than $100K.

In fact, the bank will probably list the house on the MLS at between $70-100K (given the scenario above), and if there are no takers, the price could easily drop by another 50% or more.

So, while investors had no opportunity to pick up the house for less than $100K at the foreclosure auction (which wouldn't have been a good deal), they very well may get an opportunity to purchase that same house as an REO for $50K or less.

And buying REOs is *much* easier and less time intensive than buying at auction (in my opinion and experience)...

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  • Rich Weese
    OP
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    13y

    Okay. First off, this thread is now four years old! I'll still try to answer the questions posed in the previous post and I'm sure there are others that have experienced buying a foreclosure sales now that could also chime in.

    Josh Rowley – I didn't intend to buy and hold the properties I was buying a foreclosure sale originally. At the time, there were no limits to how many properties an individual could have with an institutional lender. Most of my buyers had multiple properties already and were buying additional ones from me. These would be strictly Turnkey properties, all fixed up, new appraisals and completely rented and managed. These were going along great for over a year. I had approximately 9 properties in escrow ready to close when the government changed the regulations and limited properties to only four. Needless to say, this caused a big difference in my process! Eight of these nine properties fell out of escrow and there was nothing I could do to rejuvenate them.

    I do have other threads and posts on here during that time that give examples of the better deals that I obtained. I never really consider the dollar amount of profit. I want to consider my return as a percentage made on the amount invested. At the time, most of these properties were being purchased with a 40 to 50% increase in value. The most I ever spent on rehab was around $8000. If I remember correctly, this represented about 10 to 12% of the price I paid. I believe the net increase in price was approximately 35%.

    I believe the best deal I purchased was for slightly over $100,000 and it sold for over $200,000 with less than $5000 in rehab. I believe that story is on BP somewhere also. Actually, the worst acquisition or the scariest one is the one I referred to in the paragraph above. That story is also somewhere here on BP. After purchasing a home in the previous paragraph, I went to visit the homeowner and explain what had happened. She assured me that her home was not in foreclosure and that I was wrong. Upon returning to my information in my office, only then did I realize I had purchased the home next door........ I had to return and explain this to her very sheepishly.

    Mike H- with the spreads I was acquiring, there was plenty of room for mistakes and still making a significant profit. Many of the homes were vacant and it was possible to look in the windows or even get inside. There were sometimes, when the homes were occupied and I would just walk up to the front door and knock. I would explain to the occupant that I was attempting to purchase this comment foreclosure. Sometimes it was a tenant that didn't even know that in foreclosure and other times it was the homeowner. My explanation was always the same. I am an investor looking to purchase this home and you would not have to move unless you wanted to. You would be allowed to stay as my tenant if you met certain requirements.

    Maybe I was lucky, but I didn't really have any losers in the homes I purchased. I did have a friend who purchased one with some of my money that actually had been used to raise fighting roosters inside the house! It was a real mess.

    Scott W-but times have changed considerably as threads and posts will certainly explain here on bigger pockets. The margins are much less. As I mentioned before, I always looked at percentages of the increase in value. On the example you mentioned, there is only a 7 to 12% potential. I still feel that is very thin for someone just starting to try this program. If you miss one item, it could eliminate your profit completely. It would still not be one I would be interested in.

    I actually spent just under two years in Texas and either purchased or built 68 homes. Once you had a formula in place, it became quite easy.

    I then moved to Florida for two years to attempt to do the same thing. In my opinion, I was too late, and it was a waste of time. I was actually only able to purchase two foreclosures and the margin was less and the work was much more difficult. It became not cost effective for me and I decided to just do new construction instead. As many other posts here on bigger pockets explain, I am building homes in South Texas and southern Utah. I find both of those with percentages much more exciting to me than the foreclosure or flip process I used before. I've also posted results of those most common items. I hope this answered everyone's questions from above. Rich

    4Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    13y

    What, I was going to watch you in action on Tuesday at the courthouse steps!

    Seriously, the past four years seems like a lifetime in how much has changed in REI. Are you slowing it down yet, Rich?

    0Reply
  • Rich Weese
    OP
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    13y

    Jon K- I've only slowed down here on BP. Rich
    p.s. I'm not sure we're supposed to discuss items one on one unless it is by PM.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    13y

    Like Rich stated, this thread was started back in 2009 and we had an entirely different market back then. At that time, you COULD actually get great deals at trustee sales. During this time, we had the first time buyer program which gave buyers a credit to buy a home, we had a huge amount of REO's in the market and very few standard sales which created an easy buy opportunity combined with an easy sell opportunity. 2010 continued like that and after the buyer credits expired, the market slowed down considerably. At that time, short sales also took half a lifetime whereas now, tyou can get them done fairly quickly.

    Today, trustee sale margins are so thin, you would be lucky to slide a sheet up paper in between. I see 90%+ of value going out at most trustee sale acutions as the buy, hold, and speculate on appreciation game is back in full swing.
    Welcome to the new bubble in our new decade!

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  • Patrick L.
    Real Estate Investor · Saint Petersburg, FL · Member since 2013 · 1k+ posts · 951 votes
    13y
    Originally posted by Mike H.:

    I don't think I'd have the nerve to do it. Not only that, I know myself all too well and I'm sure I'd end up getting into some kind of trouble because I'd be compelled to look in windows, go in back yards, etc. and I'm pretty sure thats called tresspassing. :-)

    I buy from the foreclosure and tax deed auctions and you can generally tell from the curb if a house is vacant or not. Many people move out near the end of a foreclosure. If I can spot the power meter socket the color tag on there will tell me the status of the power, I can also check the water meter from the curb to see if that's on. If the house appears vacant I'll approach the front door cautiously until I can tell for sure the house is vacant. If it's vacant I don't have any issue looking in every window I can see in to get as many clues as possible. If it's definitely occupied then I don't generally go poking around too much. If you look at enough houses you can generally tell the overall condition from seeing a small portion of it. Sometimes you get a pleasant surprise and sometimes it's a little worse but I've never had any major surprises. I don't mind an educated gamble on condition, adds a bit more excitement to it.

    2Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y

    I ask the neighbors if they are aware of the pending sheriff sale, and whether the occupants have moved or not.

    Up north, in winter it gets cold, and if it doesn't have a winterized sticker on the door someplace, and if it's been vacant without heat ...

    0Reply
  • Account Closed
    Real Estate Investor · Palos Heights, IL · Member since 2011 · 44 posts · 28 votes
    13y

    Steve Babiak

    Nosey neighbors can be valuable assets when scouting houses before a foreclosure sale.

    After receiving the deed to my last foreclosure sale purchase, I immediately drove to the home to drill out the front door lock and gain entry. As I began to drill the lock out, the next door neighbor came running towards me.

    I thought she was going to start screaming at me, but instead she handed me a set of keys and garage door openers for the house. She had been taking care of the home and cleaning up the yard for the past two years while it sat vacant.

    Another time, I was walking around a vacant property that was coming up for sale that afternoon. The home appeared to be in fair condition and the opening bid was absurdly low, so I was set on bidding.

    As I was driving away, a neighbor stopped me. He told me that both owners of the home were in jail for animal endangerment. They had been using a shed in the backyard as a dog fighting arena. They were also illegally breeding and boarding 10 plus pitbulls in the home itself.

    After receiving that information, I decided to take a pass on the house.

    1Reply
  • Paul M.
    Philadelphia, PA · Member since 2013 · 1 post · 0 votes
    13y

    "My other 2 people are now researching any liens; i.e. judgements, child support, tax liens, etc. If they miss a single one, I may be screwed.This takes another week approx. "

    I'm curious as to how your two people go about this. I can't imagine you pay for title searches on hundreds of properties every month? Where I am, I'd say about 75% of properties are stayed/postponed at the sale so it can get rather expensive paying for title searches on properties that you'll either never get the opportunity to bid on, or get outbid on. In your experience, what is the best (least expensive) way to find any liens or judgments against a property?

    0Reply
  • Rich Weese
    OP
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    13y

    I'm not sure this question was to me but since no one else has replied, I'll go ahead and answer it. As I mentioned before, most of what I referred to in this thread occurred in Texas over four years ago.

    I didn't actually pay for each individual title search. In the County I lived in, there was a lady that would research the County records each month of the new foreclosures that were listed. They all occur on the same day, 21 days before the first Tuesday of each month. She would then duplicate the list and sell it to all takers for $100. I would buy the list, eliminate all land, lots, and office buildings.

    After eliminating those properties and also cities I did not want to purchase in, it would leave me with maybe 200 properties. Before doing the title work, I would send my photographer out to take ex-tear your pictures of each property and adjacent neighborhood. I would use these photos to eliminate any ghetto properties or Barb wire type properties. If I remember correctly, the actual list I finally ended up with each month would be less than 100 properties, down from over 600.

    At this time my real estate agent who also had previous title experience, would begin the research process. This would further eliminate additional properties due to liens that would supersede my purchase. I didn't want to end up with someone else's liens.

    My photographer was actually the husband of my real estate agent and have vast knowledge of the County. They were motivated to work hard since I would pay them a base commission for each purchase I made, and also a reduced commission on the future sale. There was also an additional bonus – the more properties I purchased each month, the higher the percentage.

    I felt this was a very economical method of handling the research on judgments and liens. I hope this answers the question in the previous post. Rich

    2Reply
  • Account Closed
    Stamford, CT · Member since 2013 · 4 posts · 0 votes
    13y

    Very newbie here! Went to my first auction today. Seminole county Florida. How do you know if the bank is the first or second lien holder? Do you have to go to the courthouse and read the file?

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y

    Stacy Nichols - start by reading this next link:

    http://www.biggerpockets.com/forums/41/topics/68977-foreclosure-auction-sheriff-sale-and-trustee-sale-faq

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    13y

    Stacy, the foreclosure file won't actually tell you the priority of the lien, but it is educational reading. It will tell you When the mortgage was originated. You need to go to the clerk of court's site, official records search, search the homeowner's name and you will see all recorded liens, judgements, etc. see which ones are on the subject property, in what order they were filed, and which ones have been satisfied or released. Then, after you think you know, order a title search to make sure before you bid. It would be worth a visit to the county, as they are generally helpful and will show the different web sites and how to do searches.

    1Reply
  • Geronimo Moreno
    Real Estate Investor · Vacaville, CA · Member since 2013 · 10 posts · 2 votes
    13y

    Very enlightening thanks Rich.

    0Reply
  • Rich Weese
    OP
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    13y

    Geronimo. You're welcome. Rich

    0Reply
  • Account Closed
    Stamford, CT · Member since 2013 · 4 posts · 0 votes
    13y

    Thank you both for the info!

    0Reply
  • Rich Weese
    OP
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    12y

    I just received notice that this post was voted on again. Thank you. I need to remind people that this post is OVER 4 years old and things are REALLY different than back then. Proceed cautiosly or get stung, imo. Rich

    4Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    12y

    @Rich Weese - are you implying that it's gotten easier? :)

    0Reply
  • Rich Weese
    OP
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    12y

    Just the opposite.

    Harder to find the property.

    More competition by people willing to pay too much.

    Smaller margins in % of profit.

    Tougher rules in refinancing and holding period.

    I'm sure there are other reasons that people still trying to be in that business could add. Rich

    2Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    12y

    There is still much to learn in older threads. What's the saying, "those who refuse to learn history are destined to repeat it?"

    This one notified me because I was still "following" it, after these 4 years.

    3Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    12y

    @Rich Weese - it's hard to sense sarcasm when it's typed on a forum; my most recent comment above was just trying to be sarcastic. Buying at the foreclosure auction always demands proper due diligence in advance of the bidding.

    But this thread is still a good read even today, as @Jon Klaus stated, because you (for free) outlined the effort that gets put in. As such, this thread is at the top of the list when I compiled this next link:

    http://www.biggerpockets.com/forums/41/topics/68977-foreclosure-auction-sheriff-sale-and-trustee-sale-faq

    1Reply
  • Rich Weese
    OP
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    12y

    Thanks Steve for the reminder that people still check out old input from OLD people,tic! Rich

    4Reply
  • Joe Zhang
    Real Estate Investor · Austin, TX · Member since 2013 · 50 posts · 6 votes
    12y

    learned a lot. Thanks, Rich

    1Reply
  • Account Closed
    Collegeville, PA · Member since 2014 · 7 posts · 1 vote
    12y

    learned a lot..now to the next one!!

    0Reply
  • Ron Singh
    CA · Member since 2014 · 244 posts · 47 votes
    11y

    Rich and all experienced fellas, 

    In this post and other BP posts, I read many people saying that margin/profit is getting thin nowadays as compare to few years ago in foreclose auctions. 

    I personally called few attorney's office to check whats starting bid going to be in the auction coming up for the houses i shortlisted, i found their stating bid is pretty much close to an appraised value or zestimate of the house or sometime even more

    that would make probably a 0 to 3% profit, is that same reason for everyone or its just here in Iowa ?

    also if its not the reason for less profit for all of you, what do you feel why nowadays profit is getting thin-er ?

    Please suggest. 

    0Reply
  • Barbara Long
    Martinsburg, PA · Member since 2014 · 67 posts · 4 votes
    11y

    Awesome! thanks for the info! I was told to never go to an auction do to the testosterone flying around who's  going to win....there goes your profit ( I'm the man)!  LOL! just saying... 

    0Reply
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