Buying Foreclosures Before Auction

12 Replies

Hi,

I have a friend who works for the banks on their foreclosures. His job is to go into a house once they have been foreclosed on and submit a bid to fix the house up. He is also in charge of keeping the lawns mowed for the banks and makes great money doing this. He has obtained so much business that he cannot handle all the lawns by himself (lots of foreclosures in Wichita, KS). I have been helping him take care of the lawns and get to see foreclosures all over our area.

My friend has these houses sit in foreclosure for 6 months too 3 years depending how long it takes the bank to accept a bid and pay him to fix up the properties. My friend will then give his inspection pass which allows the bank to take the property to auction.

**I'm new to this and I believe this is accurate but could be a little off**

My question is am I able to approach the banks before they poor more money into these properties and offer to buy the house straight from them? Bypassing any auction and competitors and before the bank spends money fixing the properties up? 

This seems like it would give someone a great opportunity to buy properties for less than they would get it at an auction. Any help and advice would be greatly appreciated! 

Thanks

I suppose a bank can sell anything they have clear title to. There was a movie I watched once called "99 homes," and in the movie the banks had to wait until the process played out. During a foreclosure situation there is a redemption period for the person being foreclosed on, perhaps your friend is being hired during this period when the property is technically in limbo. Of course fees occurred during this time, like your friends fee to mow the lawn, are passed onto the person who was being foreclosed on if they do in fact redeem the property.

The best way to find out is to contact the bank when you see something you like. Have a low number in hand and throw it at them and see what happens. If all else fails you can still pick up great deals at auctions. At the last auction I was at in Wichita most people left the auction as they picked up a property or just got disinterested and by the end of the auction the houses that were at the end of the auction we going for way undervalue. If you have 10k cash you can pick a property up, may not be the best area, but there are certainly some deals to be had at auction around here. They go way undervalue also at the end of the auction in better areas also, maybe not for 10k but for jaw dropping numbers compared to what they are worth. Banks put many of these homes up for no minimum and no reserve at auction, perhaps the bank wouldn't even consider selling them ahead of time for what they actually go for the day of the auction. The issue (for the banks and auctioneers) as I see it is the auction opens some 60 homes up to view for a 4 hour window, investors can't possibly look at all the homes, so they end up blind bidding. The result is the properties go for cheap because only a few bidders know what they are bidding on. 

If the bank owns the house, it's because they were the highest bidder at the sheriff's sale. Many banks have large inventories of homes to sell and some may be willing to work with you. Sounds like the best thing you could do is find a home you like and ask. Best of luck.

@Richard D. Sanders III

1. When you buy a property from a bank it is called a REO (real estate owned) purchase. Some banks will sell you items in their inventory, others will not, some will sell you SOME of their inventory but not all. It gets complicated. Banks often have their own, rather complicated tax, legal, political, and public relations reasons not to sell you one of the properties in their inventory.

2. Learning how your local sheriff/courthouse sales work in your area is a great idea, but it's most likely going to take time. When you go to your first auction, the process may be quite confusing. Don't be discouraged and walk away, as so many do. Try to learn as much as you can about the process.

3. Is that Richard D. Sanders IV in the picture?

@Jim K. Thank you and I couldn't put my son into the Richard D. Sanders legacy.... We went with Max Sanders as my wife and I just loved the name and it fits him did well. I wanted to name him Maximus and call him Max for a Nick name... but my wife shut that down very quickly lol. I will do some more research on REO properties and learn as much as I can about my local sheriff's sales, auctions and purchasing REO's.
@Michael Kiley I read or heard on a bigger pockets podcast that you can put in the offerb that it was based on the unnamed partner signing off as well. No one knowing the partner was his cat and he would then see if he truly wanted the feel. If not, then says his partner is not ready or ways to back out. Does this type of clause work? Or do you have a specific example that you use?
Originally posted by @Richard D. Sanders III :
@Michael Kiley I read or heard on a bigger pockets podcast that you can put in the offerb that it was based on the unnamed partner signing off as well. No one knowing the partner was his cat and he would then see if he truly wanted the feel. If not, then says his partner is not ready or ways to back out.

Does this type of clause work?

Or do you have a specific example that you use?

 if that advice was given on a BP pod cast then that is appalling advice.. how would you like to be the seller in that situation.. that's just straight up slimy business tactics.. no place for that in our business.. 

The majority of the properties mentioned are likely still Inntge foreclosure process.....the bank doesn’t own them yet, the borrower still owns them. 

The garbage wholesaler clauses, partner approval, etc. do Nit work with banks, only ignorant/desperate home owners. Banks will require a legit POF to look at an offer.

Originally posted by @Jay Hinrichs :
Originally posted by @Richard D. Sanders III:
@Michael Kiley I read or heard on a bigger pockets podcast that you can put in the offerb that it was based on the unnamed partner signing off as well. No one knowing the partner was his cat and he would then see if he truly wanted the feel. If not, then says his partner is not ready or ways to back out.

Does this type of clause work?

Or do you have a specific example that you use?

 if that advice was given on a BP pod cast then that is appalling advice.. how would you like to be the seller in that situation.. that's just straight up slimy business tactics.. no place for that in our business.. 

That tactic is "suggested" by several of the gurus in their "free" events.  I've heard it multiple times, and it is sleazy.  However, it is always possible someone on BP said it, but I've never heard it here.