HELP! Just won a duplex on auction, now what?

17 Replies

So I decided to jump right in! I heard other podcasts on buying properties on auction so I decided to try it out. Low and behold, I was the highest bidder! It's a duplex with 2/1 upstairs and 2/1 downstairs. It's in Cleveland, Ohio, I'm in Houston, TX. (Yikes!) It is vacant, and pictures showed the property looking in good condition. I'm sure there are some hidden things which I am not afraid of (I've renovated 2 other rental properties in the past). My winning bid was $10,200 plus the $2,500 auction fee. Similar properties have sold for $45,000(low side) and rents are $700 each unit. But my questions are:

1. Has anyone gone through this process of buying a home on auction? 

2. What are the steps you took to complete the transaction? 

3. How did you purchase it? Cash/Finance (Looking for banks who offer Fannie Mae refi exemption)

4. What's your advice on due diligence? (What do I need to look out for?)

So, if this was you, what steps would you take moving forward on this deal? Please, let me know if you have experienced this and what should I be looking out for. What are the "surprises"? TIA

@Cyndy Lester I have never completed a purchase on an auction site, someone always pays more than I think it is worth. You have already completed your due diligence. Buying at an auction is: as is(no do overs). You will have to have cash to finalize the deal unless they said they would consider financing. They will send you a contract to sign and where the monies will be placed for escrow. Hopefully you have not made a serious financial mistake. Hopefully in your rehab budget you included mold remediation, frozen pipes, bad basement, and code violations as a few examples.

@Cyndy Lester I always cringe a little when out of staters beat the local investors at auction, especially site unseen.  Having said that.... Are you being offered title insurance? Hopefully you are, and if you are do Not use auction.com’s offer of “free” title insurance.  It’s not really free as their title co adds a bunch of junk fees and they Don’t search for “unrecorded liens” such as code violations and utilities, those will not be covered by your title policy in the B exceptions.  I don’t know if you can pay for title insurance with a Higher value than your $10k, but I would if I could.

Originally posted by @Cyndy Lester :

So I decided to jump right in! I heard other podcasts on buying properties on auction so I decided to try it out. Low and behold, I was the highest bidder! It's a duplex with 2/1 upstairs and 2/1 downstairs. It's in Cleveland, Ohio, I'm in Houston, TX. (Yikes!) It is vacant, and pictures showed the property looking in good condition. I'm sure there are some hidden things which I am not afraid of (I've renovated 2 other rental properties in the past). My winning bid was $10,200 plus the $2,500 auction fee. Similar properties have sold for $45,000(low side) and rents are $700 each unit. But my questions are:

1. Has anyone gone through this process of buying a home on auction? 

2. What are the steps you took to complete the transaction? 

3. How did you purchase it? Cash/Finance (Looking for banks who offer Fannie Mae refi exemption)

4. What's your advice on due diligence? (What do I need to look out for?)

So, if this was you, what steps would you take moving forward on this deal? Please, let me know if you have experienced this and what should I be looking out for. What are the "surprises"? TIA

What kind of auction? Sheriff? Also, where in Cleveland? 

 

I'd strongly recommend backing out. Investing in Cleveland is not for the faint of heart, and if a local didn't outbid you then you either hit the jackpot or it's probably not worth a cent. Comps don't mean much in many neighborhoods, and if you're asking questions like what to look out for, then you're already in over your head because the list is long. Very long. And as Tim said, you already did your due diligence. Not trying to be negative here, but you should strongly reconsider what you're doing before you lose your $12k+. 

It does really depend on the area. Could you share with us what you bought? I bought a $9k house a few months ago in Cleveland west of Ohio City, in the shoreway. It took around $25k more to fix and rents for $700, but much had to be redone including digging up the old sewer, new plumbing, new electrical box, flooring, all new windows, new gutters, new furnace and water heater, and a complete rebuild of bathroom and kitchen--much of the work, including plumbing, I did myself or hired very cheap local labor. The sewer was a big surprise bcs it was not caught before I bought--(I inspected the house along with my friend who contracts and has rehabbed over 100 of these), but we did not catch it.

@Tom Ott I went onto Xome auction site. It is a bank owned property (cash or finance) It's in the South Collinwood area. I'm looking for multifamily properties to invest in. I currently have a SFH rental but here in Houston its difficult to find really good deals. Maybe you can give me a little more insight to the Cleveland area. I'm suppose to meet up with another investor there in Cleveland to work on another possible deal. I would appreciate any advice you can give me about the area.

Originally posted by @Cyndy Lester :

@Tom Ott I went onto Xome auction site. It is a bank owned property (cash or finance) It's in the South Collinwood area. I'm looking for multifamily properties to invest in. I currently have a SFH rental but here in Houston its difficult to find really good deals. Maybe you can give me a little more insight to the Cleveland area. I'm suppose to meet up with another investor there in Cleveland to work on another possible deal. I would appreciate any advice you can give me about the area.

 South Collinwood isn't an area I work in very much North Collinwood has seen some progress, but that has pretty much stayed north of the freeway. 

@Ryan Evans thank you for your honest input. I too was leary of winning the bid. I usually do get out bid by local investors. Of course, I was not going into this "blindly". I've invested in rental properties before. I've been through the renovation stage and have run into many issues with electrical, plumbing, septic systems, etc. My main concern was what is the process when buying from an auction. I have no experience in purchasing from auctions so not completely sure how the process works. What are the steps going forward after getting the winning bid. I am aware that sight unseen can be a risky venture, but isn't all investing? I will take your advice and look more into it. As of now, they have responded saying they did not accept my offer and want me to raise my bid. After further review, it does show on the MLS and basically they are asking for what they have it listed on the MLS. ($17,500) I am retracting my offer, which they gave me the option, if I don't accept their counter. I will take a trip out to Cleveland to personally look at the market and decide if I will invest in the area. After analyzing several properties out there, it may be worth the trip. Again, thank you for your honest input.

@Greg Wa I am looking in South Collinwood. Not sure if you are familiar with the area. Hopefully you can give me some insight to market out there. I'm planning a trip out there to check things out. Hopefully I will be able to find some properties to invest in. I had bid on a duplex 2/1 up and 2/1 down. It is bank owned. From pictures I saw it looked good, but of course what you don't see is what scares off most people. I'm looking for a realtor in the area that could possible help me with finding some good properties. So, if you know of any who know how to work with investors, please let me know. I would greatly appreciate it. 

There are deals in every market, they just aren't on the market. If you don't know a market, neighborhood, and block very well why buy site unseen there? Have you ever direct mailed a confident list built on ListSource focused on who and what you want to buy in your area? Have you tried your own off-market mailings at all? When people say there are no deals in their area, it usually means they don't know anyone who can find them or they don't want to spend the money or time to find them. @Ryan Evans nailed it. If you are beating out locals, they are laughing.

In regard to the auction, what you are experiencing is common place. You win, you lose and need to re-bid. I have closed several deals for clients on Auction.com, Hubzu, but you have to be persistent and tough. When I bid for myself I just put in my bid and wait to get outbid. Getting outbid is usually a gift when you are at your top number or close. The process should go find once it's done as most of these auction sites are linked to the MLS and an agent so more rules apply. They will be slow, but not as slow as you would think. By the time they hit an auction site they could have been sitting a long time and the bank is ready to get rid of the asset.

@Cyndy Lester  

Yes, this is interesting because, at this point, you don't know what you don't know about this acquisition. 

I think the best you can do for yourself to increase your chance of success is partnering with an investor in Cleveland on BP quickly. That is exactly what you are doing right now. SMART! 👍👍👍

Now, it appears that the local folks are saying that this isn't in a good area in Cleveland. 

You might want to pay close attention to the FREE intel you are getting here. 🤔🤔🤔

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