First Flip - Auction?

3 Replies

Auction March 20. 139K. Drove by and prop looks well maintained on outside. 1993 home in very nice neighborhood, 220 comps. 1393 sq ft.

My numbers were a $130 offer for short sale, and either wholesale it or drop the (complete guess here ) $20k in expected repairs. Even with using hard money, there is plenty of room for profit and contingency. I'm starting to look for some partners on this as well. 

The one thing that sticks out, is looking at Zillow history, this thing has been in a "state of foreclosure" basically since 2012. My concern is that they are professional tenants and would be difficult to get out, even if there is an auction sale.  

Is the auction a horrible risk for the first deal ?

The only way I see wholesaling a short sale would be to buy it outright and then resell once you own it since it'd be hard to tell when the bank would even clear it. On top of that, dealing with banks there's a reasonable chance the contract will state that there's a time period after the sale in which it cannot be resold. And just to clarify, you're talking about two different scenarios. A short sale would precede the property going to auction and unless the borrower isn't the homeowner, getting them out shouldn't be a problem and be a part of the sale.

If you're buying at auction you really want to get familiar with the auction process and preferably attend prior to the property you want to bid on. The property also may or may not actually end up on the docket on March 20th as many properties bounce on and off of the list. If you're going to go the hard money route you'll want to identify you're lender before you attend as you'll need to come up with the deposit on your own and then you'll need to find out how long you have to pay the balance which could be prohibitive for hard money. Also, some lenders won't lend to you if they can't get into the property so you'll want to make sure your lender can if it has people living there.

Thank you so much for your input Odie! I realize the short sale is actually a deal with the borrower ( and the bank agrees ). Very good tips in there ! There is also the possibility that it goes for higher than the minimum in this case too. I have a couple of duplexes, and two other single families that I am looking at this week. One duplex, I think I could get that for a BRRRR within 2 mos, and it would have a positive cash flow of $484 (ish) and a CoC of 58%.