How to obtain possession of preoccupied property (online auction)?

8 Replies

Hello folks

While looking at properties on online auction sites (auction.com, hubzu.com, etc.) I saw some of the properties with status "Occupied", "It's unlawful to disturb the current occupants" and "Buyer is responsible to obtain possession of the property" . 

How do I perform due diligence on such properties? Also, how to obtain possession of such property? Has anyone had any bad experience doing so? I just want to know how much hassle or lengthy the legal process could be. 

Looking forward to your experiences. 

Thank you.

First, in my experience, properties on online auction sites are usually foreclosure/REOs. Thus, the bank probably bought at sheriff sale (check your state - maybe different) now, what this means is that whomever was occupying that unit, probably already knows they were going into foreclosure, or, they are renting from somebody who doesn't know this is happening (I have this exact situation going on right now) As a disclosure, they list the unit as it may be occupied cause there is a possibility depending on the type of property. Condos are more likely to be vacant because associations have the power to file a FED and remove anyone from the unit who is not paying assessments. Houses might be different where you can still have squatters because no one is there to police it. Until the unit gets closer to closing, only then do the real estate companies hire a property preservation team (in my experience of course) to then officially secure the unit and then give you keys. This does mean that they have to though, they can very well just leave the unit as is and let you deal with the surprise.
I have purchased two condos via online auction and both said occupied. I did my due diligence by looking up tax record and determining the parking space (assigned spaces for condos) and scouted the joint out randomly during evening and early morning to determine if someone was living there.
If you did get a property with someone in it, all you have to do is go to the property with a briefcase and a business card and let them know you work for a company that acquired the property. Let them know the company purchased the unit at a foreclosure sale, or whatever, and let them know that your there to help them because the sheriffs eviction has been scheduled. Your there to help them, that's the angle we use and depending on your strategy you may want to offer them a lease and give them a shot to rent, but at the very moment they pay late or violate the lease, you schedule your eviction properly and get them out. There isn't really an exact way to do this in my mind, but this has worked for us and we have successfully taken back possession of units with much ease.
Good luck to you.

What's your experience like with online auction sites? Anything weird you have run into? Likes/dislikes?

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Eviction procedures vary by state.  If you don't know the rules, lawyer up.  And search for cash for keys on this site. That is how most people get illegal occupants out of a property. 

In my state, you have to go through an eviction procedure if there is more than $500 in personal property in the home.  So there doesn't have to be anyone living in the house to force a legal procedure.

That said, by far the majority of the houses that say they are occupied are not occupied by the time I look at them. Perhaps there was some personal property left behind or someone lived in the house for a while after the foreclosure and that caused the bank to check a box in their database.  

But occasionally there is actually someone living in the home.  And they generally haven't accepted the foreclosure. And they are generally pretty ticked off that the bank could have the nerve to put their house for sale.  So when you do find a home that is actually occupied it is like approaching a hornet's nest.

The real issue with these houses is the purchase agreement the banks use to sell a home they believe is occupied. They make you responsible for all the liens on the house that weren't cleared in foreclosure and so much nonsense that many people won't touch them. In NM, look out for the water bill, LOA fees. If you don't know what these costs are before you bid, be prepared for a surprise.  Read carefully, research, and recognize that it may not be for you.

And often you can't get inside, even if no one is living there, because the bank hasn't handed the property over to a property manager (assuming it is occupied).  So if you don't like sneaking around houses that just might be occupied and researching obscure liens that don't clear in foreclosure and buying houses without seeing the inside, these properties may not be for you. 

Thank you for your insights, Christopher Leon and Katharine Chartrand
The property that I am looking at is currently occupied. I tried driving around the house and neighborhood at different times and saw a couple of cars in the driveway. I am planing to talk to the customer service and see if I can get anywhere.

Christopher Leon: as far as my experience with online auction goes, the closing was a long drawn out process. The seller had not completed the foreclosure procedure and it took us 10 weeks to close. But the property was really good so worth the wait (disclaimer: this was my only experience and the property was not occupied).

So you know, it's not "unlawful" to knock on the door and get a feel for who's there, and how hard they'll be to deal with, before the auction.  What are they going to do, take away your birthday?

I was low bid on auction.com property.  Had the money and was set to wire the funds.  Woke up excited to be the new owner, knock on the door, told the tenant I was the new owner and offered them $500 to move out.  Tenant was confused and contacted the asset manager and they almost canceled my contract because I had contacted the tenant prior to recording. 

Lol @Wayne Brooks  ... I am still testing waters. Guess can go ahead and talk to the occupant as @Frank R. did. Worst case, I will not get the property. But it's worth the risk.