Can you wholesale a deal won at the auction?

33 Replies

Hello BP,

I am fairly new to REI and was wondering if you can wholesale a deal that you win at the courthouse steps? If so, how would I go about doing this?

So if I place the highest bid at an auction and they have said yes, you have won, then do I directly go to pay for this deal in all cash? Where then would my buyer fall in?

Thank you all in advance for the help!

I'm not 100% on this. 

But I know that I've never seen a property sell at auction in our market that was any where near enough of a deal to really whole sale

Also- you're buying the house outright with cash, IF you found a killer deal then I think you'd actually have to close then re-sell to an investor. I don't think the bank will let you assign over the right to your winning bid basically. 

auctions in WA are cash on the barrel head at the time of the auction. you need cashiers checks to buy then you can sell . takes 5 to 14 days to get your deed.

@Natalie Kolodij Thank you for the input!

@Jay Hinrichs So would it make sense to use hard money or private funding to actually buy the property, only to directly wholesale the deal (If it is a great deal based on the numbers and such)? Or would this make more sense to rehab and flip if i'm going to go out and get such funding? 

Thanks!

It's going to be incredibly hard to get hard money funding for your first deal to be purchased at the steps. 

Hard money lending is based on the deal- and you won't be able to view the property, get solid comps, present it to the lenders, and have them decide. I don't see this auction angle being plausible. 

You're also not really wholesaling the deal, directly or otherwise. Wholesaling doesn't involve taking ownership you're just selling the contract for the right to purchase a property at that price. 

you can call vestus.. they have a court house steps program.. you need 20 to 30% cash to purchase price.. so if you win the auction at say 300k you need to have given them a check for 60k the day before.. then they will convert to HML.. I can tell you that in todays market the lender many times will make more than the fix and flipper..

It is a little tricky and risky, but possible, you would need to make arrangements before the auction with the auctioneer and permission of the trustee to have  immediate possession of the property. 

You should also have a longer then 30 days for settlement. 

 So if your purchase has a ton of equity, there is a possibility that you can have another auction - called a short date sale, to be held in front  of the subject house. With the delayed settlement  agreement, would give you time to clean the house up a little and market the house using the short date sale method.

 You would need a proper assignment agreement, full disclosures and the title company to arrange assignment and settlement and the collection of you're giant profits.

 In the event you miss calculated your equity potential, you should be fully ready and able to settle the transaction or be prepared to lose your initial deposit. 

I know for a fact that this can be done. you are simply selling your membership in the llc that holds the winning bid. The llc transfer is the easiest way to make that happen. Here in NJ it can take 30 days to close on an auction sale. I have seen this done for big returns. however if you do not find a buyer you had best be prepared to take ownership or you lose your 20% deposit.

You can wholesale anything you buy.  There are no laws against buying a property or anything for that matter for one price today and selling it for a higher price tomorrow.  Our whole economy is based on that.

That being said, when you deal in REO's, banks can impose deed restrictions that prohibit resale for period of time, but there are ways around those, too. However, I've never seen those on sheriff sale properties.

Furthermore, you need to make sure you aren't trying to sell the property before you are in-title.  Otherwise, you are acting as an unlicensed agent, and that is against the law in every state as far as I know.

@Jay Hines  I'm not sure that's how people would refer to wholesaling in terms of an investment strategy. 

I understand that you can buy something and then immediately re-sell it for a higher price. That would just be a flip to most people on this forum as opposed to a wholesale deal. 

When people refer to wholesaling a property it's often the contract with rights to it. I don't know that I've really seen it used to refer to buying and re-selling a physical property. 

I've wholesaled so many properties, I've lost count, but I can tell you this - it's well over 1,000.

I've been an on-site mentor teaching people wholesaling for 15+ years.

I stand by my previous post.

Originally posted by @Jay Hinrichs :

auctions in WA are cash on the barrel head at the time of the auction. you need cashiers checks to buy then you can sell . takes 5 to 14 days to get your deed.

 Same here in CA.  Settlement occurs before close of business same day.

@Chris Anderson @Charles Parrish   you gentlemen are referring to East Coast Sherrifs sales.

the OP is based in Washington..  in Washington its rare to have a sherrifs sale its all Trustee sale.

to bid at the sale it goes like this.

1.  show up

2. prof your funds to the crier  that's a Cashiers check made out to the Trustee service for at least the minimum bid plus a buck... most items in our markets open in the 100 to 500k range.. rare you have a sale for less than that . at least in the bigger metro areas.

3. Legal is read by the crier ( which are usually process server companies who do this as an income source no sherrif present)... Winning bidder then stands by until the crier is done then the 2 to 4 people that bought property that day from the crier go into the coffee shop or other local sit down place and the crier fills out a receipt for your funds which includes your vesting .. you hand over your Cashiers check and your done.. the only way you get your cashiers check back is if the owner filed a VERY late last second BK or some other problem with the sale..  other than that you own it.

you drive out and its destroyed or you bid on a second thinking it was a first tough luck.

its the same in most west coast states.. NV CA OR to name a few.. I think AZ you have some time to bring back you full funds.  

The reason it is this way is the TRUSTEE's power of sale in the deed of trust.. its not  a MORTGAGE like what is common on the East coast... So your not waiting for a judge to declare the sale good or any other process of law.. its done the minute you hand over the check.. you also do not need to put up a deposit to bid.. you have to put up the FULL AmOUNT of minimum bid as stated above in a cashiers check.. this really cuts down on competition of course.

Although make no mistake about it in our areas on the day of the auction there will be Millions if not 10 s of millions in Cashiers checks sitting in peoples pockets ready to bid.

Also GA is this way I bought about 55 court house steps there.. but its frustrating there it only takes 60 to 90 days to go from default to sale but it can then take 60 days to get your deed.. and again you have to pay in full that day.

So if someone thinks they are going to wholesale these well yes you can.. sure but you need to buy you can't leverage in with a small deposit then sell your interest in the LLC or any other scheme like that...

anything is possible with advanced creative real estate  formulas. 

So it is possible to wholesale deals at the Washington Auctions.. I have seen it happen with my own eyes. There are a couple ways that it happens.

1. Person/Company buys house and is offered 5-20k to let someone else have the house. Usually it is the end user who is buying the home to live in.

2. Person/Company is bidding on house and is offered 5k to stop bidding or to not bid at all.

Although these situations are VERY Rare... It is possible

@Timothy Grothuesmann  What your describing is Collusion.. and is highly illegal its a felony.

people get busted all over the US doing this.. its not an advanced scheme its criminal acitivty.

its called lunch money ,, Walk away money, wink and nod money   etc etc.

FBI gets wind of being rampant in a market and they will send in schills...

This is Colluding to prevent competitive bidding.

think who gets hurt here.

1. Any lender or lein holder in second position. if there is fair and honest bidding they will get some money out of it.  So the banks who are in second position are cognizant to this and are getting totally screwed when this happens.

2. and even more important is the homeowner who lost the home.. if they have no junior liens they are due the overage.. I have seen overages in the 100s of thousands.. so you collude to prevent bidding pay someone 5k to stop bidding and get it for 1 dollar over the owner gets nothing when in fact they could have had a nice pay day.

3. First lien does not get affected they can only get what they are owed.

So while I can see how you thought this was cool.. it certainly is not and its highly illegal.. and if I was there and I was bidding and witnessed this activity I would file a complaint with the DA and FBI

@Timothy Grothuesmann  your point 1.. is OK I have seen this many times and have done it.

home owner does not have the cash but they have a loan lined up.. they want the house they come to the auction see who buys it.  ME  and then buys it from me the same day and we go through a normal escrow.. they need title insurance I need a deed to get title insurance.. so you still have to have the cash to buy and hold for the short term escrow.  This is whats happening.. if the homeowner or the person who wanted to own it had the cash they would simply bid.

@Jay Hinrichs

First, your comment that I thought it was cool is an ignorant statement. Never once did you see me say that I have participated in this. But that does not mean it does not happen.

And it is not illegal to sell a property that you win at auction to someone else. And end user show up all the time at the auction looking to buy a house and either show up late or are not ready to bid on the house they want due to not having the correct cashiers checks or signed up with an auction company. So if an Investor buys a property fair & square and then is approached by an end-user/another investor who really wants to flip or own that property. You are telling me that it is Illegal to sell it to them? Now most likely they will have to do a double closing, but they can also do a JV with that person until they refinance out. But they can definitely make money without ever doing anything to the property. I might be mistaken, but I do believe that is an aspect of wholesaling.

I agree, the second one is collusion, but lets not pretend that collusion does not happen in Real Estate (All Aspects). Not saying it is right, just saying it is there.

@Timothy Grothuesmann  you missed my second post were I stated your first position is a semi common occurrence. And I agree with that statement.

your second comment on Collusion is not cool and is illegal.. that's all I was pointing out.. you never stated you did this personally and you would be foolish to do so on the internet :).

And there are TON of beginners here on BP they read your post the next thing you know there down at the sale trying to collude thinking its easy money .. LOL>

The point being made was that yes you can buy and flip WA or west coast properties but you need to have the cash to bid and then you flip.. there is no weasly wholesale with no money angle in WA foreclosure sales... Or you can be part of a cartel I did this for years.. were a group of us pooled money before the auction.. and bought in the LLC name that we each were members of and took a prorate interest in whatever was bought that day.. we would go to lunch and divey up checks.

So say you only had 20k liquid that day you took that % of ownership for that particular property. And if you had no money that day the LLC your a member of still bought but you had no right to that particular asset.. this allows a group of investors some pretty heavy financial capacity.. we pretty much dominated Clark county for years .. I no longer do it but the old group and that LLC is still alive and well doing it.. margins are just too thin for my taste.

Closest to that would be to hold yourself out as a foreclosure service whereby you chase down all the deals do title and bid for the money people and take a fee.. this is quite an industry in PHX and other markets like Atlanta..  I don't see that on the west coast though simply because we don't have the volume of sales and as you probably have witnessed there is simply a ton of freaking money here and competition is fierce.

@Timothy Grothuesmann  now that I think about this.

being a bidding service on the west coast could have some legs...  its certainly a hell of a lot easier than chasing down wholesale deals.. you know the deals are there.. they are public record.. most on line.. you can go to Northwest trustee service..

you line up your private investors and do all the leg work for them.. check property check comps.. eye ball rehab.. etc etc.. then you run to their bank ( because they are busy making money in their day job) grab cashiers check and bid for them.. if you win you charge them a flat fee or you take a piece of the deal... I can see this being fruitful and less expensive than trying to mail out letters.

Just Gas and internet work.  And now that I think back to the early 2000's when I was very active in this ( number 1 or 2 buyer ) in the PDX metro area I can see a few faces that I know did not have money and were bidding for others.

A simple answer: Attempt to assign your contract to another buyer. The assignment document "pays" you a fee for the contract. In areas with heavy transfer tax such as NH, it makes more sense to do this than closing yourself and then reselling. 

@Jay Hinrichs

You are correct, I should have explained in more detail as to not give the idea that the second point was a viable option. That is a mistake on my part.

@vincent gamboa

Hey vincent, if you win the bid at an auction (courthouse steps in ga for example, check in your state for specifics), and let's say another investor or buyer wants to buy the deal from you after you won the bid,  you can easily sell it to them on the spot before you sign the paperwork to take title of he property.  

All you're collecting is the fee you agree to let them take it off ur hands for. Not the total purchase price.  they pay that to the rep who called the property.

Please keep in mind I am specifically referring to you being an actual cash buyer with real intention of making the purchase right then and there.  I am not in any way suggesting you attempt to win a bid and praying to wholesale without first paying for it. 

If someone does want it before you sign for it in your name, you can sell it to them before you do.  

If someone wants it after you paid and signed for it, then just wait till you get title and sell it then.

Dm if you need or have further questions.

@Ralph C.   the only thing with your statement out here on the west coast you need a cashiers check for the minimum bid before your allowed to bid... so if you have hundreds of thousands in the bank you certainly can do this.. if your trying to do the no money out of pocket make middle man fee's simply won't work on the west coast..

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here