Why do I not here more about people buying from auctions in order to get a property cheap to buy and hold, for fix and flip?
I'm looking at some of the starting bid amounts and the numbers are very low, obviously they wont go for that amount but why does everyone not go for this properties? What kind of drawbacks are there for going for an auction house? How difficult is it to get financing for it?
Generally financing is not available. These are mostly cash purchases. You may refinance to get your money back after but the process will not allow time for conventional lending
The starting bid is artificially low to spur bidding. virtually every auction will have a reserve price and often houses that dont meet reserve will be put to auction several time before a actual sale.
Many of these houses are in default due to money hardships which will also generally mean deferred maintenance and possibly worse. You are buying these with out access to the inside of the property so it is risky and the price will be lower to compensate for that risk.
While sometimes a steal can be had, generally the selling price of these homes is FMV minus risk and repair cost. And in some cases due to insufficient due diligents, and or not enough risk costs factored in or especially emotions getting involved its easy to actually over pay at auction.
@Scott Rogers well that makes a lot of sense as to why people do not tend to go for them.
Thank you for the info, greatly appreciated!
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