All Forum Posts by: Account Closed

Bidding for Profits at Public Auctions can be exciting and profitable or expensive, what you do, where you stand and who and what you know and the information obtained can be a great deal or a tremendously bad deal!

As an auctioneer and owner of an auction company, I have had time to lean some things that will help investor succeed or fail while bidding at auctions.

We do about 200 auction sales a year, no foreclosures or bank sales, all owner, investors, wholesalers, assignment ordered auctions of real estate only.

Here are some ideas when considering buying at auction:

Often times potential bidders will ask, "what's the opening bid?" not to worry about an opening bid, its not what you open with it is about the final bid that counts

Don't jump in and be the first bidder, wait to see what others are bidding, when the bidding slows down to almost a stop, that is when you may want to consider a bid (if it is the price you set for yourself)

At the auction, try to stand parallel to the auctioneer, this way you can see who is bidding and who is not ----- meaning at times the auctioneer will create false bids in order to get the price up. This is not legal, unless it is disclosed

Be ready to do business, since you are paying cash, have that cash ready; get credit lines, borrow money and put it in account for your auction business, have partners (preferable family) with the cash ready to use

Get your name on the mailing list of all of the auction companies in your area so that you are notified of sales

Talk to the auction associate in charge to try to get some inside information about the sale; is it owner ordered, bank auction, foreclosures, will they accept a precaution offer

Ask questions, what is the reserve (sometimes they will tell you, sometimes they won't, what is the balance of the mortgage, if your are the high bidder will you get the property free and clear of any liens

What is the first deposit, what is what is the second deposit

is there interest on the high bid from the day of sale to day of settlement (this could be very expensive), there are times when due to a legal situation, the trustee can't settle the property immediately and it may take 6 months or longer, this means that you may be paying 1% or more per month until settlement.

How soon will you have to settle, 5 days, 10 days, 30 days

Can you have possession immediately (you should get this, it will give you a head start on cleaning the property up and prepping for re-sale or rental

Will the auction company disclose any known defects (septic system failure, well failure, termites, water problems...etc,

Ask for a copy of the auction contract and forms you will be required to sign and read every word......make sure you understand what you are committing to do (many of those contracts have hidden clauses that will hurt you

Will they accept your business or personal check (try to get approved to use your checks (most auction companies require certified funds, if that is a requirement, get a certified check made out to you)

Make sure you have good comparable sales data, you need to know what the value is and what you can sell it for immediately if you have to, try to understand the repair cost also

You may want to consider selling the property (assignment) before settlement

Set your high bid price and don't go higher

Check out your competition at the sale, most of these folks are professional buyers (predators) and will out bid you or give you a chance to out-bid yourself......be careful, try to get to know them (you will see them at every auction sale, they are really good at what they do. Ask for their business cards, learn about them. You will be better prepared the next time they bid against you. You may even want to get them to be your mentor.

Check MLS to find any history of the property; this will give you some clues as to what price the auction company is looking for. Talk to the agents who had the property listed. Ask them questions, who is the seller, what was the problem, how long was it on the market, how can you reach the sellers, let the agent know that you'll pay them a fee if they help you buy the property before the auction.....this will eliminate your competition

Be pro-active, do your research, don't just show up....you need history of the property before you bid, do this and you will succeed, do not do it and you will over-pay

Visit the property before the auction sale, try to find the owner, ask questions (sometimes you can stop the auction by making an offer to buy directly for the owner (always check the local laws about buying directly from owners in foreclosurs, you would be safe by using an agent, called arms length agreement, you pay the agent for this service.

Talk to the neighbors, find out what's going on, the history of the property and the ownership, neighbor usually love to talk and will give you some great insights

Is the house vacant, for how long, can you get inside to do an inspection

check the public records, what liens are on the property, what violations, back taxes, water bills etc

If buying directly form the seller (using an agent), make sure you have a lien and title report to protect you from buying a property with other liens or judgements

Other ideas for you that may help you understand the auction business better:

Contact auction companies (always talk to the principle of the company).

Do some research of that company; what do they primarily sell, stuff (assignments), antiques, coins, real estate, foreclosures etc.

attend their auction, get to know them

At my company we have auctioneer associates, their job is to run my leads and to create leads that we can sell at auctions. They are on commission only

When you talk to the owner of the auction company, let them know that you are actively involved in real estate and would they consider hiring you on a part time bases and pay you a commission for every transaction you bring them.

Make sure you have something in writing as to the amount they will pay you.

Ask if you can become an auctioneer associate, ask if they will train you and if you can your their facilities to help get leads

My auctioneer associate's average earnings is about $90,000 a year

Use the Control and Roll system to increase your income.......that is control a property at a price that you feel you can sell for more, put it up for auction (while working for the auction company) and sell it for more, ( Example: your contract offer ----with special clauses and disclosures---is for $100,000, you book the property with your auction company and sell it at auction for $115,000, you make $15,000 equity plus 25% of the buyers premium commission paid to you form the auction company. This means you have a great opportunity to DOUBLE DIP your fees and equity. Do this a few times a month and you'll make a ton of money.

What if the property does not sell at auction? here are some ideas.....

If it is a Trustee sale, go immediately to the office of the trustee with your written offer to purchase the property.

Make sure your offer is all cash with no contingencies

Make a copy of your deposit to be attached to the contract offer

Let the bank know that a $5,000 deposit is being help by your lawyer or title company

With your offer attach a HUD-1 to show the bottom line the lender will receive (remember you are paying all settlement charges). Ask your friendly title company to create a HUD-1 for you

With the offer attach pictures of all the ugly things about the property; the landscaping, broken windows, bad walk ways, bad fencing, green water in the pool, any nasty pictures of the interior, the estimate amount of renovations needed

Write a cover letter stating what you will do if they accept your offer; secure the property, insure the house, pay all cash, take care immediately of the roof problem, protect and secure the house form squatters, have the electric turned on, notify the water department, notify the local police to keep an eye out for vandals...etc.

Since no one at the bank can make a decision as fast as you want, put a drop dead date in your offer. If this offer is not accepted or countered by January 1, this offer becomes null and void and all deposit help by the title company will be return

Remember BANKS are NOT human.......they are machines.....they don't really care about you or your money, sometimes I think they don't care about the house, there are too many levels in banks for anyone one person to make a decision (unless it is a small local bank or S&L).

Send all your correspondence by certified mail, receipt requested

You should also understand that banks usually do not have legal ownership of the property being sold at a trustee sale and that the final ratification is not completed until the sale is advertised and a judge sign the documents. This means, even after a sale at the auction, the door is still open to you to stop the auction with the cooperation of the the seller. More on this at one of my posts or blogs.

Good luck

Owners who are back on their taxes are motivated - they have a problem - you could send them a letter - this is passive marketing - that's OK - but if you really want to get a better return on a tax sale lead and make an equity or cash flow profit --- be Pro-Active. 

Call or knock on their door - offer them some options to solve their problem - get a loan - raise $ to pay their taxes - a joint venture or sell their home to you or sell to you with an option to buy back while remaining in their house as a tenant until they can exercise their option to regain ownership of their home - you create a great return by paying their taxes. 

David Armstrong, done many for me. Call me for his number.

Ask your father to get a loan on the property and deed it to you - he keeps the cash and you get the house. Nothing down -

Look at your letter - is it professionally written? If not work on it - have a great call to action.

Why not drive to the owner's address and knock on the door -

What would you say when someone answers - ?

• Hello - my name is Ms. Haynes - I'd like to buy your real estate that has a code violation
• Hello - excuse the intrusion - I am interested in making money off of your property - will you sell it to me for nothing down, take back some owner financing and give me immediate possession with a delayed settlement?
• Hello - I am Ms. Haynes - I would have called you but I couldn't find your telephone number - I represent our family trust and it is my responsibility to the trust to find suitable real estate - are you interested in selling any properties you own?
• Hello thank you for answering the door - I see that your property has a code violation - would you like to sell it to me and relieve yourself of the responsibility? 

I too like direct mail - it has worked for me for many years - I call that passive marketing - but I really prefer being pro-active and getting out there on the street and knock on doors - this is a great marketing procedure because look at all the real estate you drive by to get to that target property. 

Think about your letter - What your letter should say is exactly what you'd say if you knocked on the door. Be yourself - don't try to be cute or tricky - don't say you pay cash if you don't, be honest.

Always leave a hand written note if no one is at home.

Charles

I believe if you use the right formula - that you can accomplish your "fix/flip" without the need for money, other than the cost to fix it.

We do this all the time using a formula that gives us immediate possession with a delayed settlement and with  a hybrid partnership with the seller. 

I can sure give you some horror stories about pre-foreclosures and forclosure prospects, send me a note I'll share my experience with you. Charlie

I am the best hammer you'll ever know or need, having Teams don't mean much.

Call when u can. 

 I understand what u are saying about ur market - I believe a different - more advanced approach should serve your needs to create cash flow. 

I'll follow up later with some details on how you could work that market. I like your analysis about cars and the real estate market.

Don't know that area, but will give you some ideas on finding  deals.

There are times when sellers can't sell and will advertise their properties for rent to help with negative cash flow.  

Call rental ads, say you are calling about the house for sale. 

They may correct you and say the unit is for rent. Or they may give you price n terms. You'll know they are motivated - so negotiate a deal. 

If the say it is for rent - try to negotiate a lease option and control the unit, offer to do all the repairs n take care of problems for a discount on the rent with an option to buy in the future, some or all of the rent applied to the purchase. 

Now that u have control - rent it with an option to buy for more. - collect a down payment- this sandwich deal should make you some nice cash flow if u do it right. 

Happy to help / Charles