Tutorial for buying at foreclosure auctions

29 Replies

I invest in foreclosures in the Monterey Bay region. I have been doing this for 2 years and have had 7 profitable deals.
This is a short tutorial of the process. By the end of this post you'll have a rough idea of how foreclosure investing works and
how to go about it.

I write a blog about investing in foreclosures, at [REMOVED]. I analyze 3 deals a day in the San Francisco Bay region, where I work
(And away from where I buy). In the interest of marketing my blog, here is a tutorial in buying foreclosures, gleaned from real experience.
Feel free to ask me questions!

How do Foreclosures Work?
-If you take out a mortgage on a home and falls behind on the payments, the bank can start the foreclosure process on the home. This is
when the owner can try to short sell the home: sell it for less than he owes the bank. At the end of the process, before taking back the house,
the house must be auctioned off at the courthouse steps. This is the foreclosure auction. If the bank sets the price too high and no one buys,
then the bank takes it back, and it becomes a REO, a real estate owned. The sequence is short sale, foreclosure auction, REO.

Why Foreclosures?
-Because you can make 50-60% returns per year, at 2 deals per year and 25% returns on each deal.
At the auction, homes routinely go for 75% of market price or below. This is because of all the obstacles between the buyer and the house:
The entire amount is due in cash. This eliminates 99% of buyers right away. You cannot get a mortgage because it's a foreclosure.
The auction is held on weekdays during working hours.
The property is sold as is, where is. The loan being sold may be a worthless second loan. There may be back taxes.

-The climate is right. There is a wave of foreclosures from the housing crisis. Efforts by the government to prevent foreclosures have failed.
see http://www.nytimes.com/2010/01/02/business/economy/02modify.html

Prerequisites:
-Cash. Foreclosure auctions require a cashier's check for the full price of the property. This is the single biggest obstacle you face. As long as you can find the cash, everything else is doable. How much you need depends on the location and whether you partner with others. Have 30K at the very least.

-Time. You need to attend the trustee sales, which are held weekday mornings at the courthouse. You need to research properties, visit properties, read books, manage agents, contractors, potential buyers, and a hundred other things. To a certain extend, this work can be delegated.

-Local Knowledge. This is incredibly important. When bidding on a property, you must know exactly how much it can sell or rent for on the market. Do not rely on zillow estimates. Do not rely on comparables you found on the internet. Again, this can be delegated. Find a good agent.

How to get started:
-Step 1: Visit your local foreclosure auction. It's at your local county courthouse. In California it's held weekdays between 10-12. Google "XYZ county foreclosure auction", or visit the website of your county. At the auction, ASK THE BIDDERS WHERE THEY GOT THEIR FORECLOSURE INFO.

-Step 2: Finding foreclosures. You need to know which houses are selling before hand. Looking through public notices is NOT effective. You need a foreclosure info gatherer. Your options are:
www.lpsasap.com is free and has information on 17 states, including CA. It covers only about half of all foreclosures, however.
If you are in CA, AZ, NV, OR, or WA, you are in luck. www.foreclosureradar.com is a one stop shop with all the relevant data. $50/month, 3 day free trial.
Many sellers of foreclosure info exist, some of them are local. Bidders in Santa Clara County uses info from www.thebluesheet.com, while bidders in Monterey County use www.foreclosureradar.com.

-Step 3: Verify loan position. MAKE SURE YOU ARE BIDDING ON A FIRST LOAN! The auction is not for the property itself, but the loan. The person who holds the first loan owns the property. Information sellers like foreclosureradar and bluesheet provides this information. You can also teach yourself how to do property searches at your local county recorder office. Pay close attention to the loan amount and the loan date. The first loan should be around 80% of the property's value on the date it was created. For example, if you are bidding on a $250K property and the loan amount says $550K, this is okay. The house was probably made in 2006-2008, when prices were high. If the loan amount says $50K on the same $250K house, watch out. In my experience there's a second loan for every 30 or 40 first loans at auction.

-Step 4: Estimate the market price. Go to www.zillow.com and see their estimate. On the map, see how much comparable properties sold for (yellow icons) and are selling for(red icons). Go to www.realtor.com and see what comparables are listed for sale. Go to wwww.maps.google.com, type in the address, and use Streetview to see street level pictures of the house and neighborhood. Bring all of this together and estimate what the market price is.

-Step 5: Go to the auction and bid for 75% of the market price. Make out cashier's checks to yourself in the amounts of $2500, $5k, $10K, $20K, etc. For an added layer of safety, identify savvy investors who are there day after day, and only bid on what they bid on.

I would disagree with #4 and # 5 to start with.
4.Zillow is VERY unreliable in states I've bought in
5. If you bid 75% of Market value, you're probably screwed.Doesn't leave much room for fix up, carrying costs, sales costs etc., imo.
There are a lot of threads on BP that one should read to get other opinions on foreclosures. It is not a game for the timid or for the novice. Rich,

Agree with Rich 100% and I've only bought one property at auction.

I disgree with most of the tutorial posted and others should do more research before even thinking about bidding at auction.

Have to agree with Rich and Justin.

#5 is ridiculous. 75% is way to high if you are hoping to be profitable. Not sure about other locations, but where I buy at sheriff sale the cashier checks are to be made payable to the county sheriff. And to only bid on what others are bidding on - that one is hilarious. I HOPE that I'm the only bidder, and that I found one not on somebody else's radar, otherwise you get some crazy bidding going on and I just drop out then.

As for #4, the idea is fine - get an accurate value of the property. How you should go about it will vary depending on where you the property is located.

As for #3, sometimes there will be a second that makes sense to buy; usually that is not the case so that part of the statement seems reasonable. How you go about determining what loan priority is should be determined by the property's location. Usually, the first lien recorded is in the first position, unless there is a subordination agreement that changes lien positioning. It might be different elsewhere (but I doubt it). Dollar amounts don't always give the order, as I have seen seconds that were for bigger amounts than the first.

As for finding them (OP's item #2), if you are only interested in buying at the auctions, the public notices are all that is needed in many locations since they are required by law to be published a certain amount of time before the sale date. If you are doing other types of buying (not at the auction), then maybe getting some list provider might be worthwhile - I can't say since I don't bother with that in my area (public notices work for me).

Cash, time and local knowledge are definitely important, so can't argue with that.

The real telling line from that OP is here:

Originally posted by Frank Dai:
...
In the interest of marketing my blog, here is a tutorial ...


Usually when we get a "marketing" post on BP, something is about to be sold - and that puts the poster of such ads into the "spam" category.

To quote Rich: " 'Nuff said. "

Tough crowd! Thank you guys for the comments, though. They made me realize that I wrote the tutorial solely from the perspective of the trustee sales in Santa Clara and Monterey counties in California, and much of what goes here do not apply to other areas. I will revise the tutorial with this in mind. Again, any comments will be welcome.

To directly respond the points raised:
#2 Finding Foreclosures: Getting info from public notices is doable is only 1 or 2 sales is held per month, for example in Texas. Even Rich Weese, from Texas, uses the services of an information seller:
http://www.biggerpockets.com/forums/41/topics/32392-buying-at-foreclosure-is-easy-

In California trustee sales are held daily, and the properties sold on any one include not only those posted, but also those delayed from a previous sale. On any one day, there will be properties postponed from 10 different previous sales. Keeping tack of them becomes a nightmare, and foreclosureradar.com or a similar service becomes pretty much necessary.

#3 2nd Loans: I'll go more into how loan positions work. Thank you to Steve.

#4 Estimating Market Price: Zillow estimates may be inaccurate, but it is very useful for mapping comparables sold and for sale close to your property. Local knowledge, after all, is just a big list of previously sold comparables.

#5 Bidding: "Bid 75%" was poorly worded. There is a lot more factors to it and I will definitely rewrite this portion.

I stand by the advice to bid on what others bid on, for newcomers. The idea may be laughable to pros such as Steve, but for someone new to the game this is a powerful way to verify that they are bidding on something profitable. What are the chances that a newbie will find a deal that all the pros missed? A newcomer should be bidding on an obvious deal with a reasonable margin of profit, rather than a risky deal with a large reward.

Do your own research, come up with your own upper limit, and for an added margin of safety, bid on what the regulars are bidding on. In fact, this was how I worked up the guts to buy my first foreclosure.

[SOLICITATION REMOVED]

Updated about 9 years ago

Here is the solicitation that was removed, without the offending web address. As to the charge that I'm trying to sell something, please visit my blog, and try to buy something.

The revised Tutorial:

I invest in foreclosures in the Monterey Bay region. I have been doing this for 2 years and have had 7 profitable deals.
This is a short tutorial of the process. By the end of this post you'll have a rough idea of how foreclosure investing works and
how to go about it.

I write a blog about investing in foreclosures, at [REMOVED]. I analyze 3 deals a day in the San Francisco Bay region, where I work
(And away from where I buy). In the interest of marketing my blog, here is a tutorial in buying foreclosures, gleaned from real experience.
Feel free to ask me questions!

How do Foreclosures Work?
-If you take out a mortgage on a home and falls behind on the payments, the bank can start the foreclosure process on the home. This is
when the owner can try to short sell the home: sell it for less than he owes the bank. At the end of the process, before taking back the house,
the house must be auctioned off at the courthouse steps. This is the foreclosure auction. If the bank sets the price too high and no one buys,
then the bank takes it back, and it becomes a REO, a real estate owned. The sequence is short sale, foreclosure auction, REO.

Why Foreclosures?
-Because you can make 50-60% returns per year, at 2 deals per year and 25% returns on each deal.
At the auction, homes routinely go for 75% of market price or below. This is because of all the obstacles between the buyer and the house:
The entire amount is due in cash. This eliminates 99% of buyers right away. You cannot get a mortgage because it's a foreclosure.
The auction is held on weekdays during working hours.
The property is sold as is, where is. The loan being sold may be a worthless second loan. There may be back taxes.

-The climate is right. There is a wave of foreclosures from the housing crisis. Efforts by the government to prevent foreclosures have failed.
see http://www.nytimes.com/2010/01/02/business/economy/02modify.html

Prerequisites:
-Cash. Foreclosure auctions require a cashier's check for the full price of the property. This is the single biggest obstacle you face. As long as you can find the cash, everything else is doable. How much you need depends on the location and whether you partner with others. Have 30K at the very least.

-Time. You need to attend the trustee sales, which are held weekday mornings at the courthouse. You need to research properties, visit properties, read books, manage agents, contractors, potential buyers, and a hundred other things. To a certain extend, this work can be delegated.

-Local Knowledge. This is incredibly important. When bidding on a property, you must know exactly how much it can sell or rent for on the market. Do not rely on zillow estimates. Do not rely on comparables you found on the internet. Again, this can be delegated. Find a good agent.

How to get started:
-Step 1: Visit your local foreclosure auction. It's at your local county courthouse. In California it's held weekdays between 10-12. Google "XYZ county foreclosure auction", or visit the website of your county. At the auction, ASK THE BIDDERS WHERE THEY GOT THEIR FORECLOSURE INFO.

-Step 2: Finding foreclosures. You need to know which houses are selling before hand. Looking through public notices is NOT effective. You need a foreclosure info gatherer. Your options are:
www.lpsasap.com is free and has information on 17 states, including CA. It covers only about half of all foreclosures, however.
If you are in CA, AZ, NV, OR, or WA, you are in luck. www.foreclosureradar.com is a one stop shop with all the relevant data. $50/month, 3 day free trial.
Many sellers of foreclosure info exist, some of them are local. Bidders in Santa Clara County uses info from www.thebluesheet.com, while bidders in Monterey County use www.foreclosureradar.com.

-Step 3: Verify loan position. MAKE SURE YOU ARE BIDDING ON A FIRST LOAN! The auction is not for the property itself, but the loan. The person who holds the first loan owns the property. Information sellers like foreclosureradar and bluesheet provides this information. You can also teach yourself how to do property searches at your local county recorder office. Pay close attention to the loan amount and the loan date. The first loan should be around 80% of the property's value on the date it was created. For example, if you are bidding on a $250K property and the loan amount says $550K, this is okay. The house was probably made in 2006-2008, when prices were high. If the loan amount says $50K on the same $250K house, watch out. In my experience there's a second loan for every 30 or 40 first loans at auction.

-Step 4: Estimate the market price. Go to www.zillow.com and see their estimate. On the map, see how much comparable properties sold for (yellow icons) and are selling for(red icons). Go to www.realtor.com and see what comparables are listed for sale. Go to wwww.maps.google.com, type in the address, and use Streetview to see street level pictures of the house and neighborhood. Bring all of this together and estimate what the market price is.

-Step 5: Bidding.
I invest in foreclosures in the Monterey Bay region. I have been doing this for 2 years and have had 7 profitable deals.
This is a short tutorial of the process. By the end of this post you'll have a rough idea of how foreclosure investing works and
how to go about it.

I write a blog about investing in foreclosures, at [REMOVED]. I analyze 3 deals a day in the San Francisco Bay region, where I work
(And away from where I buy). In the interest of marketing my blog, here is a tutorial in buying foreclosures, gleaned from real experience.
Feel free to ask me questions!

How do Foreclosures Work?
-If you take out a mortgage on a home and falls behind on the payments, the bank can start the foreclosure process on the home. This is
when the owner can try to short sell the home: sell it for less than he owes the bank. At the end of the process, before taking back the house,
the house must be auctioned off at the courthouse steps. This is the foreclosure auction. If the bank sets the price too high and no one buys,
then the bank takes it back, and it becomes a REO, a real estate owned. The sequence is short sale, foreclosure auction, REO.

Why Foreclosures?
-Because you can make 50-60% returns per year, at 2 deals per year and 25% returns on each deal.
At the auction, homes routinely go for 75% of market price or below. This is because of all the obstacles between the buyer and the house:
The entire amount is due in cash. This eliminates 99% of buyers right away. You cannot get a mortgage because it's a foreclosure.
The auction is held on weekdays during working hours.
The property is sold as is, where is. The loan being sold may be a worthless second loan. There may be back taxes.

-The climate is right. There is a wave of foreclosures from the housing crisis. Efforts by the government to prevent foreclosures have failed.
see http://www.nytimes.com/2010/01/02/business/economy/02modify.html

Prerequisites:
-Cash. Foreclosure auctions require a cashier's check for the full price of the property. This is the single biggest obstacle you face. As long as you can find the cash, everything else is doable. How much you need depends on the location and whether you partner with others. Have 30K at the very least.

-Time. You need to attend the trustee sales, which are held weekday mornings at the courthouse. You need to research properties, visit properties, read books, manage agents, contractors, potential buyers, and a hundred other things. To a certain extend, this work can be delegated.

-Local Knowledge. This is incredibly important. When bidding on a property, you must know exactly how much it can sell or rent for on the market. Do not rely on zillow estimates. Do not rely on comparables you found on the internet. Again, this can be delegated. Find a good agent.

How to get started:
-Step 1: Visit your local foreclosure auction. It's at your local county courthouse. In California it's held weekdays between 10-12. Google "XYZ county foreclosure auction", or visit the website of your county. At the auction, ASK THE BIDDERS WHERE THEY GOT THEIR FORECLOSURE INFO.

-Step 2: Finding foreclosures. You need to know which houses are selling before hand. Looking through public notices is NOT effective. You need a foreclosure info gatherer. Your options are:
www.lpsasap.com is free and has information on 17 states, including CA. It covers only about half of all foreclosures, however.
If you are in CA, AZ, NV, OR, or WA, you are in luck. www.foreclosureradar.com is a one stop shop with all the relevant data. $50/month, 3 day free trial.
Many sellers of foreclosure info exist, some of them are local. Bidders in Santa Clara County uses info from www.thebluesheet.com, while bidders in Monterey County use www.foreclosureradar.com.

-Step 3: Verify loan position. MAKE SURE YOU ARE BIDDING ON A FIRST LOAN! The auction is not for the property itself, but the loan. The person who holds the first loan owns the property. Information sellers like foreclosureradar and bluesheet provides this information. You can also teach yourself how to do property searches at your local county recorder office. Pay close attention to the loan amount and the loan date. The first loan should be around 80% of the property's value on the date it was created. For example, if you are bidding on a $250K property and the loan amount says $550K, this is okay. The house was probably made in 2006-2008, when prices were high. If the loan amount says $50K on the same $250K house, watch out. In my experience there's a second loan for every 30 or 40 first loans at auction.

-Step 4: Estimate the market price. Go to www.zillow.com and see their estimate. On the map, see how much comparable properties sold for (yellow icons) and are selling for(red icons). Go to www.realtor.com and see what comparables are listed for sale. Go to wwww.maps.google.com, type in the address, and use Streetview to see street level pictures of the house and neighborhood. Bring all of this together and estimate what the market price is.

-Step 5: Bidding.
Go to your local auction and see what others bid on, and how much each type of property go for in your area. There should be a general "auction price" for each type at your auction, and it should be 50% to 75% of the real market price, less back taxes and repairs. Anything lower and you need to ask yourself if you're bidding on a second loan.

For an added layer of safety, identify savvy investors who are there day after day, and only bid on what they bid on.
The novice investor should be bidding on new, easy to flip(or rent) properties with a reasonable margin of profit, and not risky properties that may offer a large reward. Obvious deals such as these attract many bidders. Do your own research, set your own upper limit, and do not be afraid to outbid regulars, since they will leave a margin of profit for themselves. This was how I worked up the courage to start bidding on my very first property: someone whom I knew was competent raised his hand first.

Third Revision

I invest in foreclosures in the Monterey Bay region. I have been doing this for 2 years and have had 7 profitable deals.
This is a short tutorial of the process. By the end of this post you'll have a rough idea of how foreclosure investing works and how to go about it.

How do Foreclosures Work?
-If you take out a mortgage on a home and falls behind on the payments, the bank can start the foreclosure process on the home. This is when the owner can try to short sell the home: sell it for less than he owes the bank. At the end of the process, before taking back the house,
the house must be auctioned off at the courthouse steps. This is the foreclosure auction. If the bank sets the price too high and no one buys, then the bank takes it back, and it becomes a REO, a real estate owned. The sequence is short sale, foreclosure auction, REO.

Why Foreclosures?
-Because you can make 50-60% returns per year, at 2 deals per year and 25% returns on each deal.
At the auction, homes routinely go for 75% of market price or below. This is because of all the obstacles between the buyer and the house:
The entire amount is due in cash. This eliminates 99% of buyers right away. You cannot get a mortgage because it's a foreclosure.
The auction is held on weekdays during working hours.
The property is sold as is, where is. The loan being sold may be a worthless second loan. There may be back taxes.

-The climate is right. There is a wave of foreclosures from the housing crisis. Efforts by the government to prevent foreclosures have failed.
see http://www.nytimes.com/2010/01/02/business/economy/02modify.html

Prerequisites:
-Cash. Foreclosure auctions require a cashier's check for the full price of the property. This is the single biggest obstacle you face. As long as you can find the cash, everything else is doable. How much you need depends on the location and whether you partner with others. Go to your local foreclosure auction, and see how much the cheapest properties sell for.

-Time. You need to attend the trustee sales, which are held weekday mornings at the courthouse. You need to research properties, visit properties, read books, manage agents, contractors, potential buyers, and a hundred other things. To a certain extend, this work can be delegated.

-Local Knowledge. This is incredibly important. When bidding on a property, you must know exactly how much it can sell or rent for on the market. Do not rely on zillow estimates. Do not rely on comparables you found on the internet. Again, this can be delegated. Find a good agent.

How to get started:
-Step 1: Visit your local foreclosure auction. It's at your local county courthouse. In California it's held weekdays between 10-12. In some states it is held once or twice a month. Google "XYZ county foreclosure auction", or visit the website of your county. At the auction, ASK THE BIDDERS WHERE THEY GOT THEIR FORECLOSURE INFO.

-Step 2: Finding Foreclosures.
You need to know which houses are selling before hand, for how much, and if possible their loan position(see #3). How you go about this depends on your area.

Getting info from public notices is doable is only 1 or 2 sales is held per month, for example in Texas. There are often information sellers who gather this data for a fee. See Rich's post for how he operates in Texas:
http://www.biggerpockets.com/forums/41/topics/32392-buying-at-foreclosure-is-easy-

In California trustee sales are held daily, and the properties sold on any one include not only those posted, but also those delayed from a previous sale. On any one day, there will be properties postponed from 10 different previous sales. Keeping tack of them becomes a nightmare, and foreclosureradar.com or a similar online information provider becomes pretty much necessary to have foreknowledge of every day's sales.

www.lpsasap.com is free and has information on 17 states, including CA. It covers only about half of all foreclosures and has a week of back data.
If you are in CA, AZ, NV, OR, or WA, you are in luck. www.foreclosureradar.com is a one stop shop with all the relevant data and saves 4 months of back data. $50/month, 3 day free trial.

-Step 3: Verify Loan Position.
MAKE SURE YOU ARE BIDDING ON A FIRST LOAN! The auction is not for the property itself, but the loan. Loans are ordered by the date they are recorded. This is also the order they get paid in when a property is auctioned off. If the money runs out, too bad! The first loan is usually the primary mortgage, for 75% to 80% of the property's value at the time it was recorded.

In today's climate, because property values have fallen so much, the auction price will almost always be lower than the first loan, rendering second loans and below worthless.

How to find out if you are bidding on a primary loan?

The safest way is to teach yourself to do title searches at your local county recorder office. In California, the search goes like this: from the address, find the APN or parcel number. From the parcel number, find the owner's name. From the owner's name, find the Notice of Trustee Sale. That gives us the doc # of the loan they are foreclosing on. Make sure this is the primary loan, without any other outstanding loans before it. As can be imagined, this process is time consuming.

Information sellers like foreclosureradar.com provide info about loan positions, but are not always accurate.

The amount of the loan being sold is a big clue. We expect the primary loan to be 80% of the price of the property at the time it was made. In California trustee sales, a $400K loan on a house that was $500K 2 years ago is usually safe to buy, while a $100K loan on the same house is never a good idea. BE EXTREMELY SUSPICIOUS OF LOAN AMOUNTS THAT APPEAR TOO LOW.

Another option is to form a relationship with an agent, who often have relationships with title companies and can find this information with a simple phone call.

-Step 4: Estimate the Market Price.
Go to www.zillow.com. Look at their estimate, but keep in mind it is often inacurrate. Far more useful, see how much comparable properties sold for (yellow icons) and are selling for(red icons). Go to www.realtor.com and see what comparables are listed for sale. Go to wwww.maps.google.com, type in the address, and use Streetview to see street level pictures of the house and neighborhood.

Keep an eye on the neighborhood of your interest. Look for for sale signs and note the type and size of the house, and how much it is selling for. Pay especial attention to properties that sell. This is how you build up local knowledge.

Talk to your agent for his or her opinion of the market price of the property. If you don't have an agent, get one.

Bring all of this together and estimate what the market price of the property is.

-Step 5: Setting Your Bid.
Go to your local auction and see what others bid on, and how much each type of property go for in your area. There should be a general "auction price" for each type at your auction, and it should be 50% to 75% of the real market price, less back taxes and repairs. Anything lower and you need to ask yourself if you're bidding on a second loan.

For an added layer of safety, identify savvy investors who are there day after day, and only bid on what they bid on.
The novice investor should be bidding on new, easy to flip(or rent) properties with a reasonable margin of profit, and not risky properties that may offer a large reward. Obvious deals such as these attract many bidders. Do your own research, set your own upper limit, and do not be afraid to outbid regulars, since they will leave a margin of profit for themselves. This was how I worked up the courage to start bidding on my very first property: someone whom I knew was competent raised his hand first.

Frank - As per your revision, asking people to visit your website is a solicitation.

Please review the forum rules if you have any questions about posting on the site. We enforce these rules vigorously.

Thank you.

...and not all investors are greedy, we welcome all, as there is enough pie for all of us... -- Dawn

Frank - this is a tough crowd, so get used to it. Experienced investors aren't so easily misled as novice investors, and BP has an abundance of experienced investors who are prepared to challenge any misstatements and junk that get posted in the forums.

The idea to only bid on what others have bid on is just plain wrong, and can be deadly. I sat in a sheriff sale this past September where two experienced buyers were in a bidding war on a property that had been heavily discounted by the bank for the opening bid. I chose not to bid, even though it was a good price for that location. Why did I stay out? Because I saw an IRS lien for over $1 million on that property! And when I asked the other two experienced buyers whether they knew about it, they looked at me like I was bluffing them. At the next month's sale, I handed both of them a document showing that lien. The winning bidder on that one didn't feel like he had won after seeing that...

So you MUST do your own due diligence. Don't assume that others who are in there are bidding did so, because they just might not have.

My recommendation: learn how to perform the due diligence needed if you plan on participating in these courthouse foreclosure auction. And if you search the forums you'll see that I have made this same recommendation before in other threads. And that I also mentioned that $1 million IRS lien before in other threads. Because there is something about integrity ...

Originally posted by Steve Babiak:
Frank - this is a tough crowd, so get used to it. Experienced investors aren't so easily misled as novice investors, and BP has an abundance of experienced investors who are prepared to challenge any misstatements and junk that get posted in the forums


Indeed. Was the IRS tax lien junior or senior to the loan being auctioned off? Junior IRS liens are effectively wiped out at foreclosure, it's the state property taxes that must be paid off regardless of recording date.

The presence or absence of other bidders is a key piece of information. You may think it dishonest to take advantage of it, others do not share your opinion.

Should new investors learn to do their own research before joining the auctions? Of course! Not to be "honest'" but for their own good.

If I were a first time bidder without any experience, thought a property is a great deal, and no one else is bidding, I would be very, very nervous. Would it be "dishonorable" at that point to not bid?

The presence or absence of other bidders is a key piece of information.
Completely disagree! I monitor trustee sales and see many great deals go back to the bank. Why, because some are missed, there are soo many properties at teh auctions these days and some just slip through the cracks. To NOT bid on something because nobody else is would be ludicrous in my opinion.

Frank is entitled to his opinion, but as a very experienced investor in many cities and states, I would stronly disagree with much of the comments.

I do agree that one should complete their due diligence, know their market area, know how to calculate ARV's, and no the process very well. In So CAL, the trustee sales are not for the faint of heart. The bid gogs will eat you alive and spit you out, never to be heard from again.

I strongly encourage anyone without adequate experience to seek out someone who does have the ability to compete with the big dogs.

We've picked up a couple good ones that the regulars missed. Boy did they feel dumb, as we smiled like the canary that ate the bird.

Also in SoCAL there are some very nice regulars that are willing to share with others just for a smile and a sincere thank you. Just depends where they are in life.

That said, there is such thing as repaying the favor. Life out there amongst each other is just like family, you have your takers and your givers.

Give back when you can. Reach out and help someone else up the ladder of success, but do not be the type that takes, takes, takes and never gives a darn thing except an unwelcomed headache. Nothing worse than a greedy moron.

-- Dawn

Since Steve referred to a previous thread by me(thanks Steve), let me just say , this is not a game for the faint at heart. I've seen many more LOSERS at auctions, than winners. People think they know markrt, property, liens etc and find out they don't.
Also, I've yet to find any service that will help you learn or buy and GUARANTEE they will cover any loss due to them missing something.
As one who has been VERY involved in this process in 3 different states, please be careful in what you do , and who you listen to. Many will tell you wonderful stories, and that sometimes is exactly what they are,,,,stories. Good luck. Be careful. Rich

Originally posted by Frank Dai:


Indeed. Was the IRS tax lien junior or senior to the loan being auctioned off? Junior IRS liens are effectively wiped out at foreclosure, it's the state property taxes that must be paid off regardless of recording date.

The presence or absence of other bidders is a key piece of information. You may think it dishonest to take advantage of it, others do not share your opinion.

Should new investors learn to do their own research before joining the auctions? Of course! Not to be "honest'" but for their own good.

If I were a first time bidder without any experience, thought a property is a great deal, and no one else is bidding, I would be very, very nervous. Would it be "dishonorable" at that point to not bid?


In the example I mentioned, the IRS lien was in place before the mortgage that was being foreclosed.

I do not think it is dishonest to base your bid on whether somebody else has bid - I consider that to be FOOLISH! You either know your numbers, and know the lien positions, or you don't. Have you ever seen an experienced investor bid to a crazy number and drop out to teach a newcomer an expensive lesson? Have you seen buyers who later realize that they did not know what they were taking on? I'm still laughing at the guy who outbid me in June of 2009 for a house where the people who were living in it then are STILL living in it today. There is so much to learn to do this type of investing successfully.

As for my use of the term "integrity" in my earlier post, I was alluding to those who are unable to abide by the terms of the agreements they make - specifically, the agreement with the Bigger Pockets site terms of service and use. From the definition for the term "integrity"
http://www.merriam-webster.com/dictionary/integrity
there are three meanings: incorruptibility, soundness, and completeness. I try to make certain that my posts adhere to those as much as possible, within my knowledge and abilities and experience; hopefully you will be able to make contributions to this site where you can say the same.

Seems a number of experienced users here are posting that they disagree with advice being offered by the original post to this thread, myself included. To me it came across as a spam to try to lure users to another site that the original poster maintains. Nothing personal in that, just an opinion based on the info posted and based on other similar posters that have preceded this thread.

What is nice is that you can do most of your research online. County Records, just pull the FR data and you have the defaulted homeowners name, go to CR and check for liens. Then go to County Tax Assessor/Collector and look to see if they arrears on their taxes, knowing this is a big leap forward, take notes and make your move. What makes me nervous if you want to know the truth is comping and I have been comping for close to 20 years, if you mess up on comps it could cost you dearly. Right now in this market we are currently comping at 90 days out, thinking about doing only 60 days out and it is on a street by street basis, what we are now doing is instead of a 75% going all the way down to 50% off retail on some streets, yes, it is that BAD! and we are sitting on a pretty penny, so if you are on a tight budget, be real careful comping. We also save on listing commissions, since we list our own props. Also, it would be wise to watch the active listing pricing trends, a real killer if you don't. Be smart, do your homework, remember, the buck stops with you and flies out of your wallet not your real estate agent that will get upteen phone calls (leads) when they put their real estate sign in the front yard, kind of like hookers, no matter who the jon is, they will get laid, I mean paid! such is the life! -- Dawn

Originally posted by Rich Weese:
Also, I've yet to find any service that will help you learn or buy and GUARANTEE they will cover any loss due to them missing something.
Not quite true, at least anymore! (From a lien standpoint only, evaluating the value and market is ALWAYS up to the investor) :lol:

Actually, there are companies that have set up shop in several states that "do all the work for you" in finding properties and spending YOUR money on the foreclosed property. However, there are so many disclaimers you must agree to, that I'm not sure it means anything.. AND, they don't guarantee they might not miss a lien, or judgement. These are growing fast, imo. Rich

Rich,
I was talking about something a bit different but can not state here as you and I offer the means to do it and it would be considered a solicitation to talk about it in this thread..

@Steve Babiak ,@Rich Weese  , @Will Barnard   and all others :

I understand the due diligence is very very important before getting into this, i am trying to prepare the checklist for doing own due diligence. 

Please help me if you already have some sort of checklist available and info about ho can anyone do the due diligence by themself?  ($150 per title search is way too much) 

also i am not sure if its even possible or it must be done by lawyer only ? 

personally i like to search/investigate over the internet so any pointers would be much appreciated. 

@Steve Babiak ,@Rich Weese , @Will Barnard

Hello Experts,

I believe getting into foreclosures are alot of time/work/money/risk involved for a little or sometime may be descent money (if you are lucky or can sell it on the prices you expected initially) ... not sure if its worth for what you are getting..

I am in in a process of planning future and deciding the best route for investment option, basic goal is to get a regular monthly return/income while i can keep working on my current full time job, i can invest in either buying a multifamily/apartment building having 25+ units or buy a hotel/motel or buy a land and construct a apartment building(not sure if constructing a building would be bettor of buy an existing one).

i have no direct experience so i would need your suggestions and also i will be using property management for most of the maintenance work but i can do minor stuffs too. what option would you suggest ?

@Ron Singh - I don't see the tie in between your last post here and the topic title. Perhaps you would get more and better replies by starting your own topic under the "Starting Out" forum, since you state you have little experience. 

As to your post before that - this topic has an abundance of links to pertinent material. You do have to extract what you need from them, but that is part of the learning process IMO. And your specific target locale will determine answers to much of what you asked; those of us not familiar with that location aren't going to do much more than guess, so you might have to take what you extracted here and then go find a local expert who can fill in things you haven't fully understood. 

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