Do Foreclosure auctions really work?

10 Replies

How do you pitch a great deal for a foreclosure to get funded by a private lender.... I want to jump on this auction that is a great deal with crazy returns but I dont have the funds. How can I get this done. I am still less than a month into real estate and I want to get into wholesaling but the auction is a way to find great deals. Correct???

First of all, you would need to know how much to pay, or not pay, for a potential investment. ARV? Cost to rehab? Carrying Costs? After calculating your expected profit, this would tell you the maximum that you can pay for the property. If you don't know this stuff at the expert level, you will probably lose your private lender's money. Online auctions occasionally have decent deals, but even as the highest bidder, it may not meet the reserve price. I have bought 3 properties at online auctions, but most deals are found off market. Another idea is to come up with your own funds for the first few deals. Then you can tell your success stories to your potential private lenders to sell them on investing with you.

Originally posted by @Anthony Dooley :

First of all, you would need to know how much to pay, or not pay, for a potential investment. ARV? Cost to rehab? Carrying Costs? After calculating your expected profit, this would tell you the maximum that you can pay for the property. If you don't know this stuff at the expert level, you will probably lose your private lender's money. Online auctions occasionally have decent deals, but even as the highest bidder, it may not meet the reserve price. I have bought 3 properties at online auctions, but most deals are found off market. Another idea is to come up with your own funds for the first few deals. Then you can tell your success stories to your potential private lenders to sell them on investing with you.

A  do you go to the first Tuesday auctions in your neck of the woods.. we did quite well there in Atlanta metro for a number of years.

OP courthouse steps are cash and carry. on the west coast there are HML that will put up bid money.. you need to still put up 20 to 30% of the bid.. no one does 100% I will do close to 100% in Ohio.. but that's for my very experienced operators.

@Jay Hinrichs honestly, they don't do a lot of courthouse step type auctions these days. I think it's because of low turnout and you must have funds in hand. I see most of the foreclosure product at online auctions, but the reserve is usually too high the first go around. If they don't meet the reserve, they will just put it up again in few weeks and lower the reserve over time until someone buys it. I love live auctions. I thinks it's fun, but not many happen anymore. The ones I've been to end up with a retail buyer out-bidding the investors.

Originally posted by @Anthony Dooley :

@Jay Hinrichs honestly, they don't do a lot of courthouse step type auctions these days. I think it's because of low turnout and you must have funds in hand. I see most of the foreclosure product at online auctions, but the reserve is usually too high the first go around. If they don't meet the reserve, they will just put it up again in few weeks and lower the reserve over time until someone buys it. I love live auctions. I thinks it's fun, but not many happen anymore. The ones I've been to end up with a retail buyer out-bidding the investors.

I think in the ATL metro they are still alive and well..  of course not the volume back in 2012 2013 when I was buying but someone is always losing a house..   and by law first foreclosure has to be at the court house steps cant be on line.. the online stuff is stuff that the banks took back and are reauctioning. 

And yes those of us with the cash got the deals no doubt.. 

@Jay Hinrichs So you know, in FL almost all of the actual foreclosure auctions are now online, administered still through the clerk of courts (ours are judicial).  I do miss the live auctions though, more info to learn and less bidders due to no online.

Howdy @Nathaniel Charles , I am one deal into my private lending portfolio, after just closing on a courthouse steps auction last week. I posted about it too... Read more here:(https://www.biggerpockets.com/forums/850/topics/756996-closing-update-9-24-19). I'd recommend finding investors for deals the same way you find good deals for yourself. As @Anthony Dooley mentioned, you need to run the numbers.  The BiggerPockets calculators are a great tool for that because the output looks professional, and can be easily added to a packet of materials for potential investors. Once you found a great deal, it's about "packaging" and salesmanship. The places I went for instructions about packaging deals for investors is:

  • Matt Faircloth's live BP webinar (and his book, Raising Private Capital)
  • Pine Financial Group online webinar by Justin Cooper
  • Than Merril's Fortune Builders weekend workshop

Good luck with your search!

Originally posted by @Wayne Brooks :

@Jay Hinrichs So you know, in FL almost all of the actual foreclosure auctions are now online, administered still through the clerk of courts (ours are judicial).  I do miss the live auctions though, more info to learn and less bidders due to no online.

last time I worked foreclosures in FLA was fort Meyers in 09 ish they were still court house.

the going on line sure took the fun out of CA tax sales as well.  when bidders can bid on line from anywhere in the world the prices shot up.

In Vegas Auction . com is there but they cry their sales like everyone else in the parking lot of a title company daily.. they have there own little set up there. 

@Jay Hinrichs Yeah, I was bidding against your boys in Ft Myers in ‘09....I just bought a couple of personal properties.  I always regretted not hooking up with some big capital, they were Giving stuff away back then...Lee County had the Rocket Docket for foreclosures, they blew them out quick, 3-5 months start to finish....they had about 25% the case load that Palm Beach county did, but the same number of properties per day, 100-150, hitting the blocks...a definite over supply.  Then, in 2011 ish they went online.

Originally posted by @Wayne Brooks :

@Jay Hinrichs Yeah, I was bidding against your boys in Ft Myers in ‘09....I just bought a couple of personal properties.  I always regretted not hooking up with some big capital, they were Giving stuff away back then...Lee County had the Rocket Docket for foreclosures, they blew them out quick, 3-5 months start to finish....they had about 25% the case load that Palm Beach county did, but the same number of properties per day, 100-150, hitting the blocks...a definite over supply.  Then, in 2011 ish they went online.

ya that was the Mother of shouda woulda coulda ..  you had builders from the southeast building there for spec because as you know Lehigh has hundreds of thousands of vacant lots so they  could pick them up cheap.. I remember I was bidding on a package of I can recall exactly how many but it was about 50 new constructions that were sitting.. they originally were selling at about 200k I had an offer accepted right at about 5 mil or about 100k per house.. I backed out.. next thing I know we are picking up the same houses at court house for 20 to 30k or so each.. it was epic I bought half a dozen.. but then I had my own problems and it was so hard at that time to raise capital.. we doubled our money on what we bought in a year sold mainly to folks from Europe..  BUY PD is still hawking those lehigh lots they buy them for 5k and sell them at seminars for 30 to 40k.. its the old land game .. just like what I grew up in out here in the west.

I actually was on a CA sub committee on dealing with antiquated plats and we had a conference in Lehigh back in middle 80s that was the first time I was there.. and the issue was.. how do we handle all this traffic when these 250k lots of record actually get built out.. 

Now CA handled that in most jurisdictions if the lot was created prior to about 1929 its not longer recognized as a legal lot of record for building purposes. .. though the  land Geek guys still buy and sell them as they can be sold just never built on ..