How to finance an auction win

Question

Hi,

I won an auction for a property, however I am a little short on funds to cover the full payment to the county. Is there a way I can finance this deal? This is a tax delinquent sale and the ARV is almost double of what I've won it for. I need funding to help with the full deed transfer. What are the options I have for funds?

Should I go for a private money lender? Hard money lenders usually need to get an appraisal done before they lend, which won't be possible in my case since I don't have the deed in my name yet.

Tom Gimer · Answer

Many east coast jurisdictions you post 10% of the high bid immediately then need to settle within x days (10-30) of the court ratifying the sale.

Some courts are taking 3-5 months to ratify. The high bidder is paying interest on the unpaid principal during that delay.

Point being it could be several months before the high bidder needs to close. Even 15 days as is the case for OP gives an auction purchaser some flexibility.

Wayne Brooks · Answer

Yeah, definitely private money, as in Actually Private money…friends, relatives, etc. On a tax sale you most likely can not get lenders title insurance, so any normal lenders wouldn’t do the loan, including hard money.

Chris Seveney · Answer

@Shefali Srivastava

How much are you short?

If you are $10k short that’s different than $200k

Yes you will definitely want to get a private / hard money lender involved and see if they will fund it in this fashion. Just understand your rate will be crazy high because of this

Ron S. · Answer

so then you aren't short, you just don't want to use your funds. You should have stated that in your original post. I don't see a legit hard money guy touching that without running up to the point of usury to make it worth his/her effort. and if someone would, do you really want to spend $20K to borrower $80K?

James Wise · Answer

You need to have cash. Get cash, buy house, refi later. If you don't have cash, don't go to the auction until you've got cash.

Peter Walther · Answer

Those appear to be notices of DOT foreclosures so are different than what I was posting about though I'm still surprised they give the winning bidder 10 days to bring in the money.

Tom Gimer · Answer

@Peter Walther Yeah PA is full payment.

DC, MD, VA much different... here are some terms to review:

https://publicnotices.washingtonpost.com/?noticeType=Trustee...

Peter Walther · Answer

I did some admittedly quick research yesterday and came across the Wayne County, PA Judicial Sales web site that advises full payment is due the day of sale and that's always been my experience.

Judicial Tax Sales | Wayne County, PA (waynecountypa.gov)

Chris Seveney · Answer

your best bet would be to secure a loan against another asset you own. As mentioned this will not be able to get title insurance - and if you have the funds then I recommend using those funds, then getting it insured then get conventional financing on the asset.

How to finance an auction win

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