Using a hardmoney loan to purchase property at point of auctions

18 Replies

Hello I would like to buy my neighbors house which is anticipated to eventually go to auction ( long story) I could not purchase this property through traditional means therefore, it eventually will become a Deed in Lou of foreclosure.. I would like to purchase this property using a hard-money however, I have noticed that the auctions in my area require that the full payment be made at point of sale... From what I have read Hardmoney lenders require a contract first is this true? What option do I have since I don’t have the full balance at hand??

Closing with a hard money lender isn't too different than closing with a traditional mortgage, it's just done in a much shorter time than a trad mortgage. I bought my first property (a bank owned foreclosure) with hard money, closed in about 26 days. 80% of the asking price was put into escrow from my HM lender, I put in the remaining 20% + closing fees. All was then transferred to the bank on closing day. 

An auction however is a different story. If it's a sheriff's sale, then you need to have money orders there in hand in the exact amount of your offer in order to close on the property. It really depends on how your area organizes auctions. From what it sounds, your situation is more straight auction than a bank owned foreclosure so you may not be able to use HM in this case as there is never "cash on hand", you would need to schedule a closing date. 

Originally posted by @Simon Ruiz :

Hello I would like to buy my neighbors house which is anticipated to eventually go to auction ( long story) I could not purchase this property through traditional means therefore, it eventually will become a Deed in Lou of foreclosure.. I would like to purchase this property using a hard-money however, I have noticed that the auctions in my area require that the full payment be made at point of sale... From what I have read Hardmoney lenders require a contract first is this true? What option do I have since I don’t have the full balance at hand??

There are a couple threads on here from people who have seen a HML work with Sherif sales. I'm not too familiar with how that works since we don't do those. There will be only a few HML that would even consider that though.

Now some other sort of auction venue can definitely work with hard money and I see it all the time. So you have figure details of the auction.

Originally posted by @Caleb Jordan :
Originally posted by @Simon Ruiz:

Hello I would like to buy my neighbors house which is anticipated to eventually go to auction ( long story) I could not purchase this property through traditional means therefore, it eventually will become a Deed in Lou of foreclosure.. I would like to purchase this property using a hard-money however, I have noticed that the auctions in my area require that the full payment be made at point of sale... From what I have read Hardmoney lenders require a contract first is this true? What option do I have since I don’t have the full balance at hand??

There are a couple threads on here from people who have seen a HML work with Sherif sales. I'm not too familiar with how that works since we don't do those. There will be only a few HML that would even consider that though.

Now some other sort of auction venue can definitely work with hard money and I see it all the time. So you have figure details of the auction.

this product is common on the west coast especially Oregon and Washington.. its the most profitable of all HML products by far. And if I was still running my traditional HML company this is what I would focus on exclusively..

@Jay Hinrichs which product are you referring to?? The Sherif sale? I’m not sure if this property is going to be one... since I’m here in California.... What I do know is that property has a reverse mortgage I contacted the lender and they said after all the formality is done it’s expected to go to auction... after reading all this I’m still not sure If a lender exist to accommodate my needs... I’m familiar with the property because it’s next door to my parents place.. so I know risk will be minimal

Originally posted by @Simon Ruiz :

@Jay Hinrichs which product are you referring to?? The Sherif sale? I’m not sure if this property is going to be one... since I’m here in California.... What I do know is that property has a reverse mortgage I contacted the lender and they said after all the formality is done it’s expected to go to auction... after reading all this I’m still not sure If a lender exist to accommodate my needs... I’m familiar with the property because it’s next door to my parents place.. so I know risk will be minimal

On the west coast there ARE HML that provide bidding capital.. that's what U need.. And like I said if I was still running my shop that's all I would do its hugely profitable for the lender.

@Jay Hinrichs thank you so much Just learned a new word!! Now I know what to focus on.. “ bidding capital” would it be best to focus on lenders local to the area as well??

Originally posted by @Jay Hinrichs :
Originally posted by @Caleb Jordan:
Originally posted by @Simon Ruiz:

Hello I would like to buy my neighbors house which is anticipated to eventually go to auction ( long story) I could not purchase this property through traditional means therefore, it eventually will become a Deed in Lou of foreclosure.. I would like to purchase this property using a hard-money however, I have noticed that the auctions in my area require that the full payment be made at point of sale... From what I have read Hardmoney lenders require a contract first is this true? What option do I have since I don’t have the full balance at hand??

There are a couple threads on here from people who have seen a HML work with Sherif sales. I'm not too familiar with how that works since we don't do those. There will be only a few HML that would even consider that though.

Now some other sort of auction venue can definitely work with hard money and I see it all the time. So you have figure details of the auction.

this product is common on the west coast especially Oregon and Washington.. its the most profitable of all HML products by far. And if I was still running my traditional HML company this is what I would focus on exclusively.

That is interesting that it is common practice on west coast. I don't of anybody in midwest/east coast that advertises that they do it. I'm sure someone does it though.

How do they structure these loans? Do they ever run into redemption periods etc?

Originally posted by @Caleb Jordan :
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Jordan:
Originally posted by @Simon Ruiz:

Hello I would like to buy my neighbors house which is anticipated to eventually go to auction ( long story) I could not purchase this property through traditional means therefore, it eventually will become a Deed in Lou of foreclosure.. I would like to purchase this property using a hard-money however, I have noticed that the auctions in my area require that the full payment be made at point of sale... From what I have read Hardmoney lenders require a contract first is this true? What option do I have since I don’t have the full balance at hand??

There are a couple threads on here from people who have seen a HML work with Sherif sales. I'm not too familiar with how that works since we don't do those. There will be only a few HML that would even consider that though.

Now some other sort of auction venue can definitely work with hard money and I see it all the time. So you have figure details of the auction.

this product is common on the west coast especially Oregon and Washington.. its the most profitable of all HML products by far. And if I was still running my traditional HML company this is what I would focus on exclusively.

That is interesting that it is common practice on west coast. I don't of anybody in midwest/east coast that advertises that they do it. I'm sure someone does it though.

How do they structure these loans? Do they ever run into redemption periods etc?

trustee sales there is no right of redemption.. on the sherrifs sales that do have them..  its so rare that anyone redeems if they do you get your money back and the buyer / borrower takes the risk not the lender. 

Originally posted by @Wayne Brooks :

@Simon Ruiz as @Jay Hinrichs has mentioned before, there are Local hml’s that are set up for this. But I’m sure they take extra steps (maybe going on title?)  the procedures will be different and cost for the money will be more than a typical hml. 

That's Correct Wayne.. they take an equitable interest and put their name on the receipt you get when you win the bid.. title comes back in their name and the borrowers.. then they flip it to a normal deed of trust and note. bidder must put up 20% of the cash.. pay a bidders fee and then pay normal HML rates.. you add in the bidder fee and this becomes a HUGEL profitable HML product.. Like I said if I went back into traditional HML that's ALL I would do..

Originally posted by @Wayne Brooks :

@Simon Ruiz as @Jay Hinrichs has mentioned before, there are Local hml’s that are set up for this. But I’m sure they take extra steps (maybe going on title?)  the procedures will be different and cost for the money will be more than a typical hml. 

IN addition these particular companies located in SEattle and Portland.. also track all the sales and they have people on staff that bid.. the borrower can attend but the borrower puts a strike price.. so its a bundle or suit of services.. the HML does all the tracking all the title work up front of course comps out the collateral and when able walks and inspects the property.. borrower needs to do drive by and get in the property if they can.. since the borrower is taking on the risk capital IE the last 20% of the capital stack .. Its a genius model it really is. For the lender that is.. many times the lender makes far more than the borrower or .. many times the borrower actually loses money but the HML rarely takes a hit RARELY. these guys market for borrowers they have weekly work shops showing what's coming up on Friday sale etc etc.

At this stage of the market I can see this for buy and hold getting a little bit of a deal.. but for flippers it can be pretty tough right now.

@Jay Hinrichs what kind of ballpark numbers would a borrower expecting to be paying including bidder fees and such? And how would the lender make more then the borrower if the borrower is projected to refinance out of the existing loan?

@Jay Hinrichs  so after some research Im still hung up... Rain city capital only issues loans in there local market only.. Eastside funding seems to only do special case by case loans for proven personal out of state.... I'm trying to look locally but I'm having a hard time.... Difficult to believe No one in Southern California does something like rain city capital....