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 · 17k+ 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
    11y

    hello Ron and Barbara,

    I don't post as much on bigger pockets as I used to but I know there are other threads that answer the same question that I have posted before. Basically, I stopped buying properties to flip a couple years ago. The effort became much more difficult for what I perceive to be the small return on my money. I found other ventures  that have worked out better for my situation, specifically building new homes. I have been building in southern Utah and in the Rio Grande Valley of Texas for a few years.

    Less than a year ago I moved to the villages in Florida where I perceived there to be another great opportunity to build homes just outside of this master-planned community. If you are not aware of the villages please understand that there are over 100,000 people living in this community. I decided to buy some lots and build some homes just outside of the villages and have just recently completed the first home while the second one is now being sheet rocked.

    If someone can find my previous thread where I mentioned that this is what I was going to do next, I can fill in the blanks with some specific numbers. The first home is under contract and due to close within 10 days. It will be a significant profit and we actually did quite a few things wrong. I will go into more detail in the thread I started months back about this was going to be my next program.

    I found that the return for the time commitment on buying flips was not worth it. I used to buy as many as five homes at a single sale in South Texas and all were extremely profitable. Having just visited there this past Saturday I definitely don't feel it is anywhere near as good of return. As other posters will state, you can still find a profitable property but it takes a lot more work and effort.

    Good luck.

    Rich

    0Reply
  • Kyle Bentz
    New Port Richey, FL · Member since 2014 · 32 posts · 1 vote
    11y

    @Rich Weese Would you recomend investing in 100+ unit apartment complexes? I been flipping houses for 5 years and im now looking at ways to get a bigger return on my money. 

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

    Rich, 

    Thanks for your prompt response, since you moved from flipping houses to new constructions, what do you say in new constructions whats the biggest risk and challenge you face and what do you get in net return (%) after all deductions i.e building material, construction cost,Realtor fee etc. 

    I believe you must have a big team of designers /architects, contractors etc 

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

    @Ron Singh 

    I absolutely agree I have noticed that too on some of the bidding sites. Its is everywhere even here in PA.."their on to us!  LOL

    0Reply
  • Rich Weese
    OP
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    11y

    Kyle,

    I like apartment buildings. I own 154 unit building outside Dallas Texas. I also spent the last weekend in the Dallas area making walk-throughs of three different buildings I was interested in. All were over 150 units and I liked two of the three. I made an offer on one of them and thought I had offered a high price only to find out I had come in second place by $50,000 on a $6 million property. It is hard for me to keep up with the increases in prices in Texas. I have been convinced to put my building up for sale and exchange into additional apartment buildings.

    The problem I have is justifying the price per door I'm having to pay. It has gone up significantly and makes the possible acquisitions look high but I guess if I get a high price for mine on the sale, it doesn't matter.

    Ron,

    I actually have a very small group I work with. In Florida and in Texas I only have a general contractor. They do all the work with the architect and the subcontractors. I've been building homes long enough that I have a pretty good idea of what I want to build and what it is going to cost. That obviously varies depending on where you are building the homes. I mostly build in inexpensive areas where I have an exit strategy if the home does not sell. I would simply keep the home finance it and use it as a rental until the market strengthens once again.

    My returns have been significantly larger than most people earn on flips currently. I'm going to post the results of the first home I've completed and sold here in Florida shortly. It will give you an idea of what my profit is and we made significant mistakes on this first house. We have cleaned that up and are currently sheet rocking our second home and leveling the lots and preparing the pads for the next two.

    The biggest risk in any real estate investment in my opinion, is to make sure your estimate months are correct on both the cost to build and the price you can sell it for.

    I hope this helps.

    Good luck.

    Rich

    1Reply
  • Ron Singh
    CA · Member since 2014 · 244 posts · 47 votes
    11y

    @Rich Weese 

    Thanks for the info and i will wait for the numbers on your first house you build and sold in FL. 

    I like the idea of buying lot's and construct sell houses, but its hard or almost not possible in winter time to do it in central/northern side of the country, but flipping would work in winter too.  

    I guess you would prefer building single family houses instead of condo/town home or multi family. I would be interested to know how did you build your  team?

    did you find it hard to sell your initial new construction house  as sometime buyer prefer to buy a house build by old/experienced builder rather than a new name ?

    0Reply
  • Rich Weese
    OP
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    11y

    Ron,

    I pretty much have the final numbers now but don't close for another 10 days. I don't like condos so I don't build them. I build for cash and either don't have enough funds or don't want to use enough funds to build multi family. Those seem much more difficult to me from the initial stages of finding the property, getting it reason owned, completely new floor plans, etc.

    I have a licensed general contractor that is very well-known in the area and has a very good reputation. That does not cause any difficulty at all.

    Rich

    0Reply
  • Account Closed
    Investor · Miami, FL · Member since 2014 · 80 posts · 32 votes
    11y
    Hello Rich,

    i do not have a fraction of your experience but i've come to the same conclusion you made; 
    As foreclosures are becoming rarer and selling at above reasonable prices, construction is becoming more and more attractive. It is also i have to admit a much more interesting and sustainable activity than rehab and flips. Construction offers much more development possibilities on the long run. With prices reaching 2006 levels, rehabs and Short sales are nowadays selling at market prices. With many lots offered for sale and new neighborhoods gentrifying and growing in East LA, construction offers rewarding perspectives. I'm familiar with medium scale commercial construction projects (above 20000 sqft), but i'm now considering small residential developments in the 500k's, which is the first time buyers range in LA, in working class areas.
     
    Out of curiosity, do you finance your construction projects? what is your cost per sqft of new construction in your area excluding land? what is your construction schedule from the land acquisition to the effective sale? 

    Originally posted by @Rich Weese:

    Ron,

    I pretty much have the final numbers now but don't close for another 10 days. I don't like condos so I don't build them. I build for cash and either don't have enough funds or don't want to use enough funds to build multi family. Those seem much more difficult to me from the initial stages of finding the property, getting it reason owned, completely new floor plans, etc.

    I have a licensed general contractor that is very well-known in the area and has a very good reputation. That does not cause any difficulty at all.

    Rich

    0Reply
  • Rich Weese
    OP
    Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
    11y

    hi Ron,

    I do build for cash. On some occasions in the past I have used private financing at a 9% interest rate and two points. It really didn't add up to that much since I was turning the properties in less than six months. I've sold a couple properties so I have the cash to use on the construction without any financing. It does save a few bucks. In my subdivision in Texas I have been building for under $60 per square foot. That does include fully fenced yards and complete landscaping with sod front and back. Most of the homes I built in Texas were presold and the time from start to finish was 120 days. I only have the one home that has been built and sold here in Florida and it will be close to seven months from start to finish. There were a lot of mistakes and that one took much longer than the second one will take. We should be closer to 90 days on the construction and it is just up for sale now.

    Rich

    0Reply
  • Account Closed
    Investor · Miami, FL · Member since 2014 · 80 posts · 32 votes
    11y
    Originally posted by @Rich Weese:

    hi Ron,

    I do build for cash. On some occasions in the past I have used private financing at a 9% interest rate and two points. It really didn't add up to that much since I was turning the properties in less than six months. I've sold a couple properties so I have the cash to use on the construction without any financing. It does save a few bucks. In my subdivision in Texas I have been building for under $60 per square foot. That does include fully fenced yards and complete landscaping with sod front and back. Most of the homes I built in Texas were presold and the time from start to finish was 120 days. I only have the one home that has been built and sold here in Florida and it will be close to seven months from start to finish. There were a lot of mistakes and that one took much longer than the second one will take. We should be closer to 90 days on the construction and it is just up for sale now.

    Rich

     Hello Rich,

    I'm impressed by your numbers; here in LA i don't think i could build anything decent for less than $100/sqft; i have to discuss further with new builders i have contacted  recently, but i wouldn't be surprised to end up with final costs ranging between 100 and 140 per sqft. Do you build production homes? i would think it is the way to go in this business.

    Construction is tricky, because many parameters must be considered as the ideal square footage, number of bedrooms and bathrooms, construction style, etc.. but once you got the right formula for the right area, things get eventually easier. 

    I don't know how much time the building and safety plan check requires to approve new residential construction plans here, but i wouldn't be surprised if it would take 2 to 3 months. If you add the land acquisition, planning, permitting, construction and sale, we should be near a year in LA county. 

    Home presales interests me, but i'm not familiar with the process; do you market your homes through your own entity or through a well established local company?

    0Reply
  • Justin Chandler
    Lithonia, GA · Member since 2015 · 4 posts · 1 vote
    11y

    Great post, filled with very useful information! Many of investors that I've worked with in the past have expressed interest in buying homes through the auction. Because of my little education and the many people (including my broker) advising me to stay away because of the mess they could bring, I didn't feel comfortable providing assistance in this arena.

    I'm going to put some of these research methods to use and attend some auctions to get some exposure. If anyone is in Atlanta and plans on going to the DeKalb County auction August 4th DM me, maybe we can connect!

    -Justin 

    0Reply
  • Joe Moore
    Rental Property Investor · Los Angeles, CA · Member since 2010 · 804 posts · 230 votes
    11y

    Wow!  Great thread!  And the beat rolls on.

    0Reply
  • Angel Dejesus
    Businessmen · Boston, MA · Member since 2014 · 47 posts · 6 votes
    10y

    thanks for the insight. Exactly what I wanted to here. 

    0Reply
  • Kay Martin
    Killeen, TX · Member since 2017 · 8 posts · 9 votes
    9y

    Thanks for sharing insights on auctions.  I also live in Texas and was thinking about trying auctions. I had no idea how  complicated preparing for an auction can be.   Your feedback is a huge help.  

    I recently bought a HUD 2 months ago...that was a learning experience, also. Sounds like HUD is more straightforward than auctions. I got a really good deal via HUD (bought the house with 30K in Equity from the start). So, I'll stick with HUD, REO, FSBO. Thanks for the auction lessons-learned.

    0Reply
  • Jinal Shah
    Charlotte, NC · Member since 2017 · 5 posts · 0 votes
    8y
    What happens if you win the bid in foreclosure at court house , but you decide to walk out? How much do you loose?
    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    8y
    Originally posted by @Jinal Shah:

    What happens if you win the bid in foreclosure at court house , but you decide to walk out? How much do you loose?

    You almost certainly will lose any deposit you were required to put up, and depending on where you are attending the court house auction it could be that you lose the full bid amount (might as well just take the property if that is the case). In NC, I would check with @Chris Martin 

    https://www.biggerpockets.com/users/wakeProperties

    1Reply
  • Account Closed
    Durham, NC · Member since 2016 · 50 posts · 16 votes
    8y

    You will your bid money and more if the resale of the property is less than the bid you are walking away :-(

    https://www.ncleg.net/EnactedLegislation/Statutes/...

    45-21.30. Failure of bidder to make cash deposit or to comply with bid; resale.

    "A defaulting bidder at any sale or resale or any defaulting upset bidder is liable on his bid, and in case a resale is had because of such default, he shall remain liable to the extent that the final sale price is less than his bid plus all the costs of the resale. Any deposit or compliance bond made by the defaulting bidder shall secure payment of the amount, if any, for which the defaulting bidder remains liable under this section"

    1Reply
  • Patrick O'Neill
    Member since 2018 · 2 posts · 0 votes
    8y

    Some really great posts from Rich! Thank you! Although his original auction post is over 8 years old now!

    Getting back into auctions...

    Any experienced investors buy at auctions in CA? Or even any more recent tips/walkthroughs for any auctions in the US?  

    0Reply
  • Sam Ferguson
    Real Estate Broker · Tampa, FL · Member since 2017 · 38 posts · 11 votes
    8y

    Great info! Loved reading it and great examples of what to look for.

    Thanks,

    Sam

    0Reply
  • Sunil Dudeja
    Member since 2020 · 15 posts · 2 votes
    3y

    Very valuable information. Many thanks to you.

    0Reply
  • Carol Lam
    Member since 2023 · 19 posts · 7 votes
    2y

    Is it possible to buy a title insurance on the foreclosed property before I decide to bid on the courthouse step?  I am interested in one property which I have done research on the County Recorder's Office and find that it has an abstract judgment on the owner.  The case is still active.  Does this judgment mean it has a lien on the property?  

    What's the procedure like at buying a property at auction?  Say I am the highest bidder, then do I record the deed at the county myself?

    Thank you.

    Carol

    0Reply
  • Julie Smith
    Member since 2023 · 45 posts · 2 votes
    2y
    Quote from @Rich Weese:

    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!

    Can you elaborate on why he got nothing?  The foreclosure was for a second position lien (the second mortgage), but doesn't that mean he would have to pay for 1st position mortgage to make the property his?  As in your scenario wouldn't any auction with a second position lien not really be a foreclosure on the home?  Thanks for any insight.

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