buying an Auction property, no inspection contingency view

11 Replies

Are all auction foreclosures in America, site unseen, no contingency, no inspection, no return?

What kind of strategy can a buyer with cash and not much experience in flipping do to participate in an auction purchase with condidence in numbers?

1. the buyer peak in window, or buyer asks an agent to peak in window?

2. then hope and pray your estimate is close?

Assume the absolute worst including owner-occupied as of the closing date and bid accordingly.

In addition to being trespassing, peeking in the window only tells you the condition as of the day of the peeking.

You will be surprised EVERYTIME. Think of what must happen inside a house for people to absolutely walk away from it and not even try to sell it.

You WILL eventually run into the following:

A house that has had too many animals, either pets or infestation.

Mold / Grow operation

Squatters/ human waste/ house stripped of all copper plumbing and wire

Caveats/ liens against the property that have to be paid prior to change of title.

Do as must due diligence as possible prior to the auction, hope for the best, expect the worst, and have a good remediation team on hand. 

@David Weintraub please forgive me, I did not mean to imply EVERY house that goes up for auction will have issues. Sometimes a mortgage goes upside down and it's just better to walk away. Totally get that! And if you can find those, it's a treat... but if you're at auctions enough and pick them up to flip or BURR you will run into these issues.

Some auctions still happen in person and you might get 30 min to walk through.  Now, many are as is, where is, no viewing.  

Having done both, I like the first.  You get a better sense of the space as your nose can tell you a lot.  

In the second, a peak through the windows can be deceiving. I learned that my nose is a better indicator than my eyes.  

So, planning for the worst, as others pointed out, is a good idea.

@Matt Berklacy most successful auction buyers defend themselves by purchasing multiple homes per year, perhaps dozens or even hundreds. This levels out the risk by blending homes left in pristine condition with ones that are a complete wreck. You never really know what you are getting so you’ll win some and lose some. 

If you buy only one, you might win, you might lose. You can do that without all of the hard work—just go to Vegas and put it all on black.

Originally posted by @Steve S. :

@David Weintraub please forgive me, I did not mean to imply EVERY house that goes up for auction will have issues. Sometimes a mortgage goes upside down and it's just better to walk away. Totally get that! And if you can find those, it's a treat... but if you're at auctions enough and pick them up to flip or BURR you will run into these issues.

Yes, you will definitely run into these issues, but it's not all the time.  I have countless borrowers who purchase properties that haven't been inspected that have few problems.  Also have clients who couldn't see the roof of a 3 story building, and once inside they got to the third floor and saw nothing but blue skies.

My advice?

Buy a drone with a camera.  

You can peek in windows. Is it trespassing? Maybe, you may find yourself in a very dangerous situation. But the better question is what are you learning? I have been to many houses where the windows are papered over. The thing about betting, whether in Vegas or down the street, is you have to have deep pockets and system. If you have the cash to deal with:  A house that has had too many animals, either pets or infestation, Mold / Grow operation, Squatters/ human waste/ house stripped of all copper plumbing and wire, Caveats/ liens against the property that have to be paid prior to change of title, and afterwards not be financially ruined then go for it. 

Wow, some scary replies. Lol

I have been buying auction properties and if you go with absolute worst case scenario, in my experience you will rarely be the highest bidder. There is some risk with auction properties and you find something new every time. I suggest you drive around, ask neighbors, bid on empty homes (look for notice on the door) and try to buy in mid to high end market and you can get decent return.