Rental Property Investor · KS/MO · Member since 2017 · 34 posts · 14 votes
Anyone have experience bidding on/buying a property that doesn’t allow viewings or have interior pictures because it is occupied? I found a house I am interested in buying and the auction is on Hubzu, but I’m a bit nervous about bidding or trying to buy this without knowing what the condition of the inside is like. Bank has owned for 3 months but the previous owners still live here and even have their Christmas tree up (so I’m assuming they don’t plan to get out soon). Would it be worth knocking on the door and asking to view it or asking about the condition? I’m worried they would be hard to evict if I did end up winning the bid.
This is fairly common with many foreclosures and auction sites. It is obviously risky to purchase without seeing and inspecting the property so factor the risk into what your final bid will be. I don't recommend approaching the tenants, most likely in the auction site it prohibits it. Also, from my experience owners that are getting foreclosed on aren't overly helpful to prospective buyers. Also if you win the bid and have to foreclose on them it is best not having personal contact, especially if you have to see them in court.
Purchasing these kind of properties come with a huge discount on purchasing. You get the discount because of the added risk and because you will get stuck evicting the tenants. It can be a lot of hassle, but a great way to buy properties with potential equity.
This is fairly common with many foreclosures and auction sites. It is obviously risky to purchase without seeing and inspecting the property so factor the risk into what your final bid will be. I don't recommend approaching the tenants, most likely in the auction site it prohibits it. Also, from my experience owners that are getting foreclosed on aren't overly helpful to prospective buyers. Also if you win the bid and have to foreclose on them it is best not having personal contact, especially if you have to see them in court.
Purchasing these kind of properties come with a huge discount on purchasing. You get the discount because of the added risk and because you will get stuck evicting the tenants. It can be a lot of hassle, but a great way to buy properties with potential equity.
@Walter Aaron Poling I appreciate the response! It just makes me nervous buying something without knowing the condition and possibly having a hard time evicting the occupants. I thought maybe I could knock on the door or give them a call if I can find a number just to get a feel of how they may be and potentially get a look at the house. The particular property I am looking at would need to drop a bit more in price to factor in the risks involved.
To clarify an earlier comment - If it's a bank-owned property, then it has already gone thru the foreclosure process. Once you buy from the bank, you cannot foreclose on the tenants because they are not the mortgage-holders.....they are just tenants (paying or not!). Which means you will have go to thru the eviction process.
I am from Missouri and have met a fantastic eviction attorney that works with MO/KS investors and I know she does a lot of work for buyers on Auction.com. (So let me know if you want her contact info.)
Also, there are regular, MLS listings that can go from an 'okay status' to 'rehab status' if left uninhabited - I know many investors last winter that were shocked to view an unoccupied residence that was left over winter and had pipes burst and it destroyed the main living areas. And I even know investors that thought they rehabbed well then went to the inspection phase of a sale to find $15,000 worth of mold behind the walls. So there are surprises with any type of home purchase!!!
One suggestion is to have a realtor help with due diligence of homes in that area - look at photos of all the surrounding houses to see what current condition the homes SHOULD be in. Do all the neighbors have granite? Do all the neighbors have updated bathrooms? If yes/no, then make your rehab budget reflect those updates....that will greatly help you to know what number you can buy the property for.
If your buying number matches the bank's selling number, go for it! And then after you buy and evict and start your rehab - if you don't need as much rehab because the previous tenants did not destroy as much, then you will end up earning more on the flip!
Hey by the way folks, Rachel has a workshop in Kansas City on buying foreclosures at the court house steps that is totally free. So be sure to friend and message her to find out when and where. I think there is one in St Louis, Springfield and Kansas City.
Having bought on the courthouse site unseen, there are a few things you can do prior to the auction:
1) research the house, sometimes it was listed in the past year or two with photos. This got us an amazing house once that needed nothing but the carpets cleaned.
2) Drive by and look at the outside. 90% of the time the outside condition is indicative of the inside. If the outside is perfect, the inside will probably be in decent condition and if the outside is trashed, you can figure the inside is a mess.
3) Age of home, if the outside is in good shape, but its an older home, be prepared for pink bathrooms and blue carpet. And an original kitchen.
Most of the auction sites do in fact prohibit approaching the occupant. It may be the previous owner or the tenant. In many cases that I have gone by and the listing has said not to approach but have found the place obviously vacant: 3-year-old foreclosure notices all over the door, a door standing wide open and no one around, and other times the neighbors tell us its vacant. Obviously, your property is occupied with the Christmas Tree.
So in Missouri, I would factor your guestimate of repairs, the cost of eviction and the cost of holding the property for 3 months. Then if you can still get it at the right price, once you own it, approach the occupants to learn their story. They might be great tenants you want to keep, they might be the former owners, either way, you could offer them $1000 to move out and maybe save on the eviction.
@Preston C. always expect the worst when you go to buy a property like this. Expect a minimum of $10k to make ready the interior. Expect the inside to look worse than the outside. Expect 3 months of not gaining access to the property due to the eviction. Expect another 2 months before you see rental income. Add 10% to all of this and if the numbers still make since, then go for it!
Thanks everyone for the responses/info. This house is actually just on the KS side of the border. I am actually interested in buying it to live in short term and potentially rent out in the future. I've learned that these Hubzu auctions are a bit odd. They have a reserve priced pretty high and the starting bid goes all over the place every time it relists. I've been watching patiently hoping I can get it at a decent price. As of right now the price isn't low enough just yet to be worth the risk to me.
The main thing I was wondering is whether or not I should knock on the door. I thought that could give me an advantage as a bidder knowing at least something about the interior of the home. I figured the worst that could happen is I'd get the door slammed in my face and told I can't see the house.
What you cant see you need to assume is really bad. Ive seen occupied auctions go really cheap. A fund I sold for baught one around $120k, evicted the occupants, and resold the home for $220k. (estimating figures off bad memory). The house was in very good condition, we just put new appliances. You could also lose money tho. A fund has enough money and deals to only care that at the end of the year they make an overall profit.