Due diligence on courthouse steps forclosures

12 Replies

Evening BP’ers, I want to start going to the local courthouse to find potential foreclosed properties. I understand the need to look at Liens, 1st vs 2nd mortgages, taxes, etc... but I want to make sure I know the ins and outs of this process before making a bid. I was thinking of offering a real estate attorney $$$ for their time to teach me due diligence process/everything to be aware of before bidding. Does anyone have any other advice on how to go about learning the courthouse auction process?

@Adam Philpot Well I can't really give you advice on much but I will say you should go an check out a couple in person just to see how it all works. I have been to a couple here in MA, but they are at the actual property.  I know they were not what I had expected but I am glad I have a better understanding of how the process goes if I find myself trying to buy one in the future. 

Hopefully other can give you some solid advice and I will be checking back to see what everyone else says. 

Good luck!  

most states will have their foreclosure statutes on line. read those first. but confirming with an attorney is a good start. 

keep in mind each state is vastly different.. then sometimes each county in the state are quite different .. and maybe right down to the city  etc etc.

However do keep in mind its a business and in each venue there are usually 10 to 20 companies or investors ( larger MSA's ) that do this for a living have been doing it for years and are very stiff competition.

One thing is certain you just cant hone in on one property.. if your going to do this you need to be looking at 20 to 50 properties that are coming up because only 1 to 3 of those will actually get all the way to the end and be sold off.

Thank you. I went to the courthouse auction a few weeks back to see how the process works. I noticed the property I went there to see didn’t go to auction so I’m understanding what you mean to look at many properties. I’m focusing on 2nd tier markets in hopes to have a fighting chance against the big guys.

If there is any specific steps/training/experts to talk to that you can recommend if greatly appreciate your guidance.

@Adam Philpot a real estate attorney? You can learn that watching youtube for free. Attorney's are not investors, so I wouldn't take their advice. Buying at the courthouse steps is probably not the best place to begin in my opinion. There are people who need to sell their property in your market that you haven't talked to.

Originally posted by @Adam Philpot :

Thank you. I went to the courthouse auction a few weeks back to see how the process works. I noticed the property I went there to see didn’t go to auction so I’m understanding what you mean to look at many properties. I’m focusing on 2nd tier markets in hopes to have a fighting chance against the big guys.

If there is any specific steps/training/experts to talk to that you can recommend if greatly appreciate your guidance.

smaller counties would be a good bet its not as chaotic but again don't fool yourself into thinking there wont be some money guys there.. 

but your odds do go up.. most never get started at this because its just so much work to find one property.. and well you can do just as good bidding on expired listings many times.. 

I've been involved in this in 2 cities. In both places the entire process was run by an old boys club of about 3 or 4 guys.  They punished anybody who tried to join them but would eventually let them in. In my experience it is entirely a closed loop process and very hard ot find a genuine deal. All the good inventory goes to the main buying group. It'l like an open secret in the 2 towns I was working in.  In fact I would pay one of the "mafioso" to buy for me if there was something I really wanted as that was the only way I could make it work.

It did have an upside though. I was buying a property for a client and had a contract at 53K. The bank foreclosed before we could get it done so about 2 weeks later it popped up on the steps. I paid 36K for the property and 5K for the guys fee so it was a profitable outcome all round :-).

So assuming most cities are the asme my advice would be to find out who runs the courthouse steps and see if you can get into their circle and establish who's who in the zoo.

Originally posted by @Dean Letfus :

I've been involved in this in 2 cities. In both places the entire process was run by an old boys club of about 3 or 4 guys.  They punished anybody who tried to join them but would eventually let them in. In my experience it is entirely a closed loop process and very hard ot find a genuine deal. All the good inventory goes to the main buying group. It'l like an open secret in the 2 towns I was working in.  In fact I would pay one of the "mafioso" to buy for me if there was something I really wanted as that was the only way I could make it work.

It did have an upside though. I was buying a property for a client and had a contract at 53K. The bank foreclosed before we could get it done so about 2 weeks later it popped up on the steps. I paid 36K for the property and 5K for the guys fee so it was a profitable outcome all round :-).

So assuming most cities are the asme my advice would be to find out who runs the courthouse steps and see if you can get into their circle and establish who's who in the zoo.

 There are quite a few "good ole boys" sitting in prison out here on the west coast for manipulating public auctions.

@Adam Philpot You can play with the big boys if you target properties that they don't like to buy. In 2011-2013, I picked up a couple dozen lower end condos that most of the big guys weren't interested in. I had little competition and most of the time I was the only bidder. These condos were for long term rentals and were not good for flips. Now, they're worth 3 times what we paid for them and rents have gone up 50-80%.

is it a sheriff’s sale (tax sale), or trustees sale ( mortgage foreclosure)   Both are held on the courthouse steps in my county, but are very different. It’s also very state specific judicial vs non, tax deed vs tax lien, etc. I’m dealing with right of redemption, right to contest sale issues right now. But the best info I’ve seen so far on sheriffs sales is from @Arnie Abramson  he has monthly meetings to discuss tax sale ins and outs. And his website is informative too. Good luck. 

I think a lot depends on just how many properties are going to auction. I've bought effectively in Detroit and Dayton, OH without the problems mentioned above. However, both those places were just swimming in foreclosed properties. All kinds of decent buildings going for 10-20k per. That is not much to lose and the foreclosure process should wipe the title clean if they do it right (detroit doesn't, dayton does). How is Nashville?

I like the treasurer's auctions better than the sherrif's auctions just because the banks aren't there driving up the prices. good luck -- its a major factor..