bought my first foreclosure yesterday, despite BP advice ;c}

66 Replies

Well, first off I just reached one of my 2010 goals - to purchase a foreclosure on the court house steps!

I've been going to all auctions with meat and watching the big boys bump knuckles. You know, the stuff in the burbs that retails around 150 - 350k. Not wanting to put that much skin in the game straight off, and also wanting to stick to my buy hold rent SFRs in a fast appreciating hot RE market, I purchased a 2100 sq ft SFH on a very large city lot (66 x 150). The house was vacant, so I poked around quite a bit, though I couldn't gain entry. The walls look good, from what I could tell (recently painted) and the windows are replacement vinyl, the roof looks good. Doing my due dil turned up this: buyer paid 55k in 95 (neighborhood was not what it is today - ie drugs & crime) - owner occupied, and put some money into it. Judgement was for 96k, but they opened at 84 and went to 86,6. Being a newb and all, I wasn't sure if I should bid as it was just me there, oh, and a younger lass who wants to buy the house, but doesn't have capital to play the game. by her look, I'm sure she would qualify for FHA / conventional though (yup, got her number for possible flip). So I can the attorney for the bank and say, "hey, I'm sitting here on the steps and there are no other bidders... I'm tempted to pass, can I make another offer after." I got some run around, but basically they said "yes, you can put it in writing and send it over, but it will take time, and there are no promises." Anyway, knowing the street, and the neighborhood, I didn't want some realtor putting a number in the banks head (higher than the 86k I'm sure) so I opted to take my certified funds and buy the sucker. Now, I know that because my friends the big boys were not there, that this isn't the best deal that can be had on a regular basis. They're looking for 50c on the dollar and less, holding for short times, and reselling for market rate. This was about 60-70c on the dollar, depending on who you ask. You ask me and I'll say that it may be that now, but in 5 years, I'm going to be really happy. So why all this post? Well basically, I think it really comes down to what you know, and your gut. My SFRs are all in this area so I can package them up nice when it is time to exit. I have 2 others on this street. This has a garage at the very back of the large lot, that has a dead end street the buts up to it, AND it has a gate to my lot!! Now I have a place to store stuff where I won't get in my Tenant's way! I've got ample space to build if I want. Plus I checked with the city prior, and I can legally convert this SFR into a duplex.
Anyway, living and learning, and loving BP - just wanted to let you all know I'm very excited to have hit a 2010 goal already! Can't wait to check a few more boxes off my list.
Comps in this area tell me that I could flip it for 120 without doing anything, and in about 1 week on the market.

Feel free to comment / advise etc.


congrats feels good anytime you can check one off of your list. I am still working on my big goal for this year!


Where is the BP thread that makes you say "despite BP advice"? Please post link if you can.

I personally favor those where nobody else is bidding (those are cheaper!), but I am aware of somebody else posting here to not bid unless you see others bidding - HOGWASH! Just be certain of your own due diligence before opening your mouth to bid.

I think you need to buy lower at foreclosure auctions, but if the numbers work for you...

I am with Steve on this. if the BP advise you read was not to bid unless others are, I second the Hogwash. Some of the very best deals are those in which nobody else bids, usually becase the min bid was dropped at the last minute and nobody had done research on the subject property.

As for the % numbers you tossed out, I would like to see anyone post a live and real deal that was had at 50% of real value (remember, buying at % of value MUST include the acquisition as well as the rehab costs - otherwise, anybody could buy at 50%, but it could take another 40% to bring it to the ARV).

Not sure which state you are buying in, but here in CA, no way will you get 50% of value all in at trustee (other than a grandslam/needle in haystack)

Good luck on your acquisition and congrats.

I anticipate at least 10 to 20% of value will be needed to repair a property bought at the foreclosure auction, so that is why I say to offer a bit less. And repairs can easily exceed the percentages I am giving here, especially when the property's borrowers have been in default for a long time.

Will - the thread I was refering to is this one, where you and I and others chimed in:

Thanks everyone for the responses. The reason I put "Despite BP advice" was a reference from this post
I just skimmed back through there, and there was a lot of good advice. I stand by my decision though I still have not been inside the house. I've posted pictures of the house, I think you'll like them ;C}

Seems like you ended up paying less than the numbers that were suggested as MAX in that other thread. The repairs part is always the uncertainty with these auction properties. As I said earlier, as long as the numbers work for you...

Now, go read the link that I posted above; in that page you'll find another post I made with a link to Rich Weese's suggestions for buying foreclosures at auction. Go do the things he says to do after - pictures of inside, get it insured , etc.

Thanks Steve, I'll follow your link now. I think we got a deal. How did you like the photos?

Steve, just finished the link you sent and now me elated feeling is quashed. I never checked out the position of the lien or anything. My attorney told me what to do, but I caught myself short on time and said F it. now I'm really saying F it!!! The paperwork is at his office, so hopefully he will tell me soon that I am cool and not SOL. :-/

Originally posted by Mark Claire:
Thanks Steve, I'll follow your link now. I think we got a deal. How did you like the photos?

The photos I saw were the exterior. Showed that some work was needed (at least some concrete that seemed chipped, a boarded window).

It's the inside that is always the surprise; when you get those photos, then we can offer better opinions :cool:

Congrats Mark, you seem to know the area well and what your exit strategy will be.

Congrats on your purchase. And thanks for sharing the pics....


Any updates / progress to report on this one?

Yikes! You really didn't check lien position. That could end up being the most expensive lesson of your life.
I hope for your sake it was a first position lien foreclosing.

Back taxes can get you too!

Ha ha sam, indeed... 11k lessons learned! I'll be sure to keep this thread updated. I'm confident based on experience that it is the first position. It doesn't make sense otherwise... Anyway, not sweating it yet... But DEF will not do such a newb thing again... I was literally running down main street to get to auction in time... Not that it is an excuse... Just being honest about the situation. Live and learn, glad I got u folk & pro team... Now I need to always cross my t's ;-)

Looking forward to hear about you progress on this deal.

I would advise you to be sure of the lien position BEFORE doing any work to the property.
I've seen a property someone bought at auction now facing foreclosure 9 months later by a first position blanket mortgage. If you look at the county records it does not appear as attached to the property but if you look at the other property owned by the same person it is very evident the blanket mortgage also encumbers the property he bought at auction.

Not really that scary to buy at auction if you have a title company involved and get a commitment. The title report will include such encumbrances as taxes but if you know they are there you can bid accordingly.

Lien was 1st position. Additional Defendants: IRS, still had no problem getting Title Insurance. Closing is scheduled for tomorrow at 2! Will be sure to post pictures of the interior then!

Disclaimer: I am not an attorney, so what I am saying here is not to be construed as legal advice - just my opinion - and legal counsel should be consulted.

Assuming this was in the state of PA, the fact that the IRS was named and served as additional defendants is a good thing for you. That was done with the intent of removing the IRS lien from the property, so that the IRS no longer encumbers the property; I also believe that this action also takes away the 120-day redemption rights that the IRS would otherwise have. The former owners still owe the IRS that money, but it now does not impact title for you.

Updated over 2 years ago

IRS redemption rights to not go away by naming IRS as a defendant. But naming IRS as defendant is required to prevent the IRS lien after the foreclosure from sticking to property as a now senior lien.

Thanks Steve, I'll address this with my attorney tomorrow. From the conversation we had over the phone it seemed like the 120 day redemption-rights would stand. I'm starting to get EXCITED!

stay tuned :D

I am glad that this turned out alright for you. :) I hope you can appriciate just how lucky a break you got.

Enough to cause a little stress I bet :)

Still, as long as the insides check out relatively OK, buying in that 60-70 cent range can work out fine. I personally don't bother above 70, unless I know for a FACT that at best, cosmetics need to be done inside...even then it's 80 tops and I'm still hard-crunching numbers to be sure I can possibly make something decent on it after all costs.

If the IRS right of redemption is not wiped out, then you need to evaluate the decision to move forward with putting money into rehab immediately (with the potential of IRS redeeming and you lose anything you put in), or waiting out the 120-day redemption period before putting any money into the rehab.

So you bought this thing without seeing the inside? I thought I had balls. Lets see some pictures.

Hey from Vancouver BC kids, sorry, only brought the iPad and no laptop... Will have to wait for the interior pictures. Of course it looked a little worse in person, and the copper in the basement is gone! Luckily the water heater (newer side vent) and furnace are intact as well as the copper in the walls!! Carpets are a little stained - woods under are decent ... Interior Paint is OK, last update = 1980. Found out from neighbor that owner had listed for 180k before skipping town... A little high back then, but all and all I'm happy. Will post pictures next Thursday. Thanks for all the help from one lucky sob. Cheers! Mark

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