I have a property I am interested in bidding at auction and need help figuring out a max bid. this will be my first auction purchase. I have some experience working for my dad as he has around 30-40 cheap rentals, but he hasn't made a purchase since 2009. Markets change, and what was accurate in 2009 isn't today. I researched the deeds of trust and know the guy losing the property paid $99k in 2004. Zillow says it is worth $139k, tax rolls have it at $103k. From looking up deads of trust in the area borrowed amounts all over the map in last couple years, anywhere from $125k to $260k for similarly sized houses (obviously quality may be different). My best guess would be to that this house could sell around $179k in good condition. What would be a good way to determine a max bid for this potential flip? It is a 1500 sq ft 3/1 that will need central A/C added and possibly convert some space to make it a 3/2 in order to get a good retail price. House looks straight from the outside, but no idea anything else on the inside obviously. I tried approaching the owner to purchase the house pre trustee sale as this is not his homestead, but he didn't even open his door (told me not interested through the door) and was completely closed to even speaking to me about the house. Also I know the owner has like $200k in IRS liens...what kind of research do I need to do about that, or does that disqualify the property.

@Sam Epstein, with respect, you're probably overthinking this one. It sounds like you've locked in on this one property and are researching the hell out of it. But odds are, it won't even get auctioned. I buy nearly every month at the trustee auction in Tarrant County (Fort Worth & suburbs). About 60% of the houses on the list don't end up getting auctioned. (January, for example, 290 homes on the list pre-auction, 102 actually got auctioned). Buying at auction is a tricky thing. I try to go with around 15 properties in mind that I want to compete for. Of those, 8-10 will get pulled, another 2-4 will sell to the creditor because their bid is higher than anyone would realistically pay, and there might be 2-4 that I can actually bid on. Hopefully, I win one of those, but some people get crazy at auction and homes - that need repair and that you can't get inside to see - will sell for 80% ARV. It can be a great way to buy property, but you can't get too locked in on one propery. Good luck!

I showed up with a list of about 10 properties today, including this one, and left without buying anything. Several (including this one) I was able to verify got pulled, several went to high, and several I have no idea if they were pulled or if I just missed them, since it is very disorganized at the foreclosure auction.

@Sam Epstein car auctions and RE auctions could not be more different at the auto auction.. the bank owns the asset and WILL sell It that day. they already have title. Sherrifs sale are quit different .. the bank does not have title and is trying to get it or sell it. Bottom line think of the auto auction were you have to look at 1000 cars.. nail it down to 100.. and then ready to pounce on the 10 that actually go to third parties..

@Michael Hayworth @Jay Hinrichs any rules of thumb for what you pay at auction. I get that you can't really break out expenses since you can't see inside, but what kind of rules of thumb do you go by, or are possible to achieve when buying from foreclosure sales? 50% arv on older homes needing more renovations, maybe 60% on cleaner looking/newer house? Jay, I don't see how paying retail outside foreclosure sale is a low risk strategy, since the market is fairly tight where I live at the moment. I am very familiar with car auctions and have bought well over 1000 used vehicles that way, and bid on thousands. Those auctions are very different in that there is way more volume and if I want to buy 5 trucks at wholesale prices under $10k next week it can be easily accomplished since there will probably be at least a couple thousand vehicles sold at dealer auctions in San Antonio in a week's time. For the entire month there may only be 500-1000 houses on the foreclosure list in Bexar county with 1/2 getting canceled and 1/2+ of remaining reverting to the lender, with less than 1/4 left for investors. Are there any deals being found by you guys currently? I had some unexpected health problems otherwise I'd still be in the car business. Just trying to learn something new, any advice is much appreciated.

@Sam Epstein @Michael Hayworth is an accurate depiction of how trustee or sherrif sales work.. you simply either know what your doing or you don't if you don't like you.. then most likely this is far to risky.. and like Mike said 95% chance this all a bunch of work for nothing as the property 1. gets pulled for some unknown reason 2. a pre foreclosure buyer redeems it for the owner 3. owner files BK 4. bank messed up and postpones 5. your over bid by 3p 6. Banks credit bid ( because of PMI ) far exceeds its as is value if you want to buy foreclosres you need to follow Mikes road map he laid out that's how its done. if you want to do a normal escrow were you put up EM then do your due diligence dureing your inspection period then you can get into the tules like your trying to do

@Sam Epstein, a footnote to today's lesson:- Once the Bids exceed YOUR number - move on! The moment you bid MORE than "your number" - you've FAILED this lesson! Cheers...

How much to bid at auction? Also IRS liens?

Christopher Phillips

Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes

9y

@Sam Epstein

Max bid would be the same calculation as any flip. ARV - rehab costs - financing and closing costs - desired profit = max purchase price.

Some use 70% rule. [ARV *.7 ] - rehab = max purchase price.

If you buy the property at auction, you'll have to negotiate the liens, which can take a long time in some cases.

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Nancy Bachety

Rental Property Investor · North Fork, NY · Member since 2016 · 1k+ posts · 631 votes

9y

You've done due diligence but I'm not so sure an IRS lien is the type of lien you could negotiate down enough here to take on that risk. But I am interested to hear what others have experienced. Either way, good luck.

How much to bid at auction? Also IRS liens?

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