Buying foreclosures at the court house in NC

8 Replies

I'm seeking those who have experience successfully, or unsuccessfully purchasing foreclosures at a court house in North Carolina.  We are looking in the Durham, and Raleigh area.  It does seem quite competitive.  Given the process involves many trips to the court house, many bank withdrawals to place your bid, much time to be outbid, etc...  We're wondering if we're just spinning our wheels here.  Also wondering if there are other areas in NC where we would have better luck closing on a foreclosure. I do remember a BIggerPockets podcast where an investor here said there was so much inventory in Fayetteville, NC, that she couldn't even keep up with it.  Would love to connect with some people experienced with the process!

having been a courthouse investors for some decades now I did check into NC it one of the tougher states to work for various reasons.. but the upset bid process is the most daunting.. so I think its got to be more of a business than a past time. 

Lots of time involved with 97% of the deals not working. 

Originally posted by @Jay Hinrichs :

having been a courthouse investors for some decades now I did check into NC it one of the tougher states to work for various reasons.. but the upset bid process is the most daunting.. so I think its got to be more of a business than a past time. 

Lots of time involved with 97% of the deals not working. 

Agreed, Jay, the upset bid stuff is very tedious.  VERY hard to end up with a REALLY good deal unless you are out in the sticks with no other bidders even around.  I have bought a few parcels of land that way in a rural NC county, but even there, one of them dragged on with a few upset bid cycles.  

From a former Wake county courthouse buyer perspective, what I see is very few S-TR filings and lots of capital chasing those few potential sales. The result is a very low foreclosure premium from what I experienced years ago. The premium is now basically zero, and the risk/reward ratio puts the buyer in a disadvantaged position. See my post on this other BP topic (When will the Raleigh-Durham market cool down?) for an example ($300,100 courthouse steps purchase on a $126,600 original note.) There was a time when there was a legitimate foreclosure discount but those days were a long time ago, during and after the Great Recession. I knew the game was over when AH4R ran out of MLS property to buy and showed up in the Special Proceedings room.

You may be able to find a deal occasionally, but for me the opportunity cost of 'winning' a few percent of the time vs. the time/effort involved is not an opportunity worth pursuing. Of the couple dozen or so properties I bought from the courthouse steps, more than half had no bidders (other than me). And in this market the other phenomenon you may experience, like I did in 2006~2008 timeframe, is that when you do bid, others with lower margin expectations will step right in and file a SP-403 (upset bid) right behind you. They let you (or me in my case) do the hard work and then they take the deal. My philosophy is 'if you swim against the current, you will drown.' So at the moment I am (still) on the sidelines.

My 2 cents. 

Originally posted by @Chris Martin :

From a former Wake county courthouse buyer perspective, what I see is very few S-TR filings and lots of capital chasing those few potential sales. The result is a very low foreclosure premium from what I experienced years ago. The premium is now basically zero, and the risk/reward ratio puts the buyer in a disadvantaged position. See my post on this other BP topic (When will the Raleigh-Durham market cool down?) for an example ($300,100 courthouse steps purchase on a $126,600 original note.) There was a time when there was a legitimate foreclosure discount but those days were a long time ago, during and after the Great Recession. I knew the game was over when AH4R ran out of MLS property to buy and showed up in the Special Proceedings room.

You may be able to find a deal occasionally, but for me the opportunity cost of 'winning' a few percent of the time vs. the time/effort involved is not an opportunity worth pursuing. Of the couple dozen or so properties I bought from the courthouse steps, more than half had no bidders (other than me). And in this market the other phenomenon you may experience, like I did in 2006~2008 timeframe, is that when you do bid, others with lower margin expectations will step right in and file a SP-403 (upset bid) right behind you. They let you (or me in my case) do the hard work and then they take the deal. My philosophy is 'if you swim against the current, you will drown.' So at the moment I am (still) on the sidelines.

My 2 cents. 

Chris What you describe for the person losing the home if they dont have a ton of junior debt is a wind fall.. they get the overage :)

I have seen many times were owners that lost property got far more money losing it then trying to sell it.. I am sure they had no clue it was going to happen that way.. 

the Upset bid process as stated kept me out of that state  ..  I came to the same conclusion why go to the front end and bid just wait to the confirmation or upset hearings are posted then start looking ???

 

Originally posted by @Jay Hinrichs :
Originally posted by @Chris Martin:

From a former Wake county courthouse buyer perspective, what I see is very few S-TR filings and lots of capital chasing those few potential sales. The result is a very low foreclosure premium from what I experienced years ago. The premium is now basically zero, and the risk/reward ratio puts the buyer in a disadvantaged position. See my post on this other BP topic (When will the Raleigh-Durham market cool down?) for an example ($300,100 courthouse steps purchase on a $126,600 original note.) There was a time when there was a legitimate foreclosure discount but those days were a long time ago, during and after the Great Recession. I knew the game was over when AH4R ran out of MLS property to buy and showed up in the Special Proceedings room.

You may be able to find a deal occasionally, but for me the opportunity cost of 'winning' a few percent of the time vs. the time/effort involved is not an opportunity worth pursuing. Of the couple dozen or so properties I bought from the courthouse steps, more than half had no bidders (other than me). And in this market the other phenomenon you may experience, like I did in 2006~2008 timeframe, is that when you do bid, others with lower margin expectations will step right in and file a SP-403 (upset bid) right behind you. They let you (or me in my case) do the hard work and then they take the deal. My philosophy is 'if you swim against the current, you will drown.' So at the moment I am (still) on the sidelines.

My 2 cents. 

Chris What you describe for the person losing the home if they dont have a ton of junior debt is a wind fall.. they get the overage :)

I have seen many times were owners that lost property got far more money losing it then trying to sell it.. I am sure they had no clue it was going to happen that way.. 

the Upset bid process as stated kept me out of that state  ..  I came to the same conclusion why go to the front end and bid just wait to the confirmation or upset hearings are posted then start looking ???

 

In 'normal times', when there were less than a billion real estate investors, the reason I would bid at the trustee sale rather than after (via 403) was simply because the upset bid costs 5% more.

I bought a property in 10/2005 for $63,000 that cost me $3,000 extra (an extra 5%) because I didn't attend the sale. I didn't attend the sale because the lien holder told me they wouldn't adjust the initial (opening) bid. I had worked for several weeks with the owner on what would later commonly become called a 'short sale' and through the process it was clear that the opening bid (mortgage, late fees, escrow shortage, etc.) was well over the value of the property. I knew this was the case because I showed the lien holder the HUD-1 for a property on the same street I bought a handful of months prior. The lien holder rejected my direct offer, which was substantially below the payoff amount but about the same as our other one. Several weeks later, a few days before sale, I touched base with the lien holder who told me 'no' again to a direct purchase and that the opening bid would be the full trustee price. Well, on sale day, the opening bid was called out at the courthouse steps to an empty audience. I found out the next time I went to the courthouse. After kicking myself, I filed an upset bid, 5% above the last 'winning' bid which was the bank's adjusted price. I learned my lesson.

Originally posted by @Chris Martin :
Originally posted by @Jay Hinrichs:
Originally posted by @Chris Martin:

From a former Wake county courthouse buyer perspective, what I see is very few S-TR filings and lots of capital chasing those few potential sales. The result is a very low foreclosure premium from what I experienced years ago. The premium is now basically zero, and the risk/reward ratio puts the buyer in a disadvantaged position. See my post on this other BP topic (When will the Raleigh-Durham market cool down?) for an example ($300,100 courthouse steps purchase on a $126,600 original note.) There was a time when there was a legitimate foreclosure discount but those days were a long time ago, during and after the Great Recession. I knew the game was over when AH4R ran out of MLS property to buy and showed up in the Special Proceedings room.

You may be able to find a deal occasionally, but for me the opportunity cost of 'winning' a few percent of the time vs. the time/effort involved is not an opportunity worth pursuing. Of the couple dozen or so properties I bought from the courthouse steps, more than half had no bidders (other than me). And in this market the other phenomenon you may experience, like I did in 2006~2008 timeframe, is that when you do bid, others with lower margin expectations will step right in and file a SP-403 (upset bid) right behind you. They let you (or me in my case) do the hard work and then they take the deal. My philosophy is 'if you swim against the current, you will drown.' So at the moment I am (still) on the sidelines.

My 2 cents. 

Chris What you describe for the person losing the home if they dont have a ton of junior debt is a wind fall.. they get the overage :)

I have seen many times were owners that lost property got far more money losing it then trying to sell it.. I am sure they had no clue it was going to happen that way.. 

the Upset bid process as stated kept me out of that state  ..  I came to the same conclusion why go to the front end and bid just wait to the confirmation or upset hearings are posted then start looking ???

 

In 'normal times', when there were less than a billion real estate investors, the reason I would bid at the trustee sale rather than after (via 403) was simply because the upset bid costs 5% more.

I bought a property in 10/2005 for $63,000 that cost me $3,000 extra (an extra 5%) because I didn't attend the sale. I didn't attend the sale because the lien holder told me they wouldn't adjust the initial (opening) bid. I had worked for several weeks with the owner on what would later commonly become called a 'short sale' and through the process it was clear that the opening bid (mortgage, late fees, escrow shortage, etc.) was well over the value of the property. I knew this was the case because I showed the lien holder the HUD-1 for a property on the same street I bought a handful of months prior. The lien holder rejected my direct offer, which was substantially below the payoff amount but about the same as our other one. Several weeks later, a few days before sale, I touched base with the lien holder who told me 'no' again to a direct purchase and that the opening bid would be the full trustee price. Well, on sale day, the opening bid was called out at the courthouse steps to an empty audience. I found out the next time I went to the courthouse. After kicking myself, I filed an upset bid, 5% above the last 'winning' bid which was the bank's adjusted price. I learned my lesson.

I think one reason the banks or note holders make full credit bids on properties they know are underwater is to make an insurance claim . 

 

@Ben Kirchner

I’ve been trying to close a foreclosure property for the past year without success, both by contacting the owner before the sale happens and by bidding at the courthouse steps. The 10 day upset bid period draws it out for a long time, and bidders are paying way too much/retail for a house of unknown condition, IMO.

Most frustrating is when you have the high bid and are getting close to closing, but then the owner files bankruptcy yet again and the auction is canceled! This happened to me last month.