I’ve been thinking about auctions for awhile now and wanted to get anyone’s perspective that have actually bought from auctions. I know of the dangers, etc and have done my research, but I wanted to have a personalized open discussion with those that have actually bought from an auction or utilizes auctions for great deals.
As always, there’s only so much you can learn from books and articles so any tips are greatly appreciated!
Another thing I’ve been strategizing about is horrible weather-day auctions. I know banks will send bidders out on behalf of their interest to bid for the owed amount, but I know there’s times that people just can’t make it to auctions whether it be bad weather or just something as stupid as car troubles. I’ve tried researching a strategy like this, but I didn’t find anything. I live in the northeast where bad weather is a given. I’m just trying to think outside of the box to find some great deals.
Auctions are designed to get the most for the object being sold. They don’t get you the least for it. You get the best deals from the individual in a one on one negotiation. That being said I did buy a 2 bedroom house for $700 (that was a whole house including the lot) at an auction. You can’t run a business unless you have a system to get a regular supply of houses in a repeatable fashion. Auctions being designed to make you pay the most possible don’t really produce regular deals.
We bought a 2/1 fron an online auction. We also bid on another 2/1 online, but that one went too high for where we needed it to be. Both of these houses were listed on the local MLS. We didn’t even know initially that they were being auctioned. We only found this out when we put in bids on each. The listing agent then told our agent about the auction.
There was only one initial bid for the house we won. It was listed on the MLS for 16k. The auction reserve turned out to be 10k and that’s where we won it. We went and checked out both of these houses prior to bidding so we knew what each needed. The house we bought needed some work, but nothing too bad. We had to have part of the roof repaired for about $500, new flooring in the bathroom and a walk-in closet, painted a couple rooms, re-finished about 300 sqft of hardwood floors, new range hood, installed new sewer line (about $800), and just cleaned up a bunch of left behind junk. End result is we put about $2500 into the house and it rents for $500/mo.
So we had a good experience with an online auction. Haven’t done a live auction at a property yet though.
I understand what an auction does, but you don’t have to buy high for homes at auctions or bid on everything you see. I wouldn’t expect to go to an auction and buy a house for pennies each time I go, but it’s that one or two times you CAN pick a home up for pennies that makes it worth while. I’ll get it where I can get it if you know what I mean. I was just curious how many people here use auctions as a part of their plans/ strategies.
Thanks for the insight. It seems as if you did your homework pre-auction and made out very well!!
Let me try to say this in English. If you are doing a business you want to buy whatever you buy at a steep discount. While there is a deal every now and again at an auction you don’t generally find enough deals there to make a business out of it. You can find deals anywhere but a forum designed to make you pay as much as possible is like looking for a wife at a strip club. There are girls there and every now and then you hear about someone meeting his wife there but that does not mean that you need to go there looking for your wife. There are not enough deals at auctions to build a business on.
Go ahead and go to auctions because there may be a deal there, also go to strip clubs the love of your life may be there, but don’t count on either of them so find a more probably path to acquiring houses that can make you money.
I understand that, again, and don’t expect to buy a house for 500 dollars or get an incredible deal each time I go, BUT if I can buy 1 or 2 homes for great deals then why not? I’m not dreaming nor do I think I’m being unreasonable. If I have a business model, my top priority is to BUY RIGHT. I don’t care if I get a lead from a transvestite riding backwards up the street on a uni-cycle so long as the numbers make sense. You’re adamantly contesting an idea that was only meant to be another means of grabbing good deals from time to time. Nobody said you could build a business around this, and that’s highly subjective as well.
Bluemoon: in my area, I’ve seen some houses go for cheap at auctions. Yes, auctions are designed to get the most money, but they also are designed to let people unload quickly.
I just bought a small 3/1 with long-term tennants for 5.5K. New electrical service, other than that nothing major.
- Figure your max bid before the auction and don’t go over that price.
- Never, ever bid on a house that you or someone in your organization hasn’t seen in person because you’ll need to estimate repairs in order to figure MAO, then work down from there. Write that max bid down and don’t exceed it.
- At the auction they’ll send spotters over to you to try and make you overbid…stick to your guns!
- Never bid more than the minimum increment.
- Wait til close to the end of the bid before you start bidding.
- And don’t forget the buyer’s premium!!! They’ll add it to the winning bid. Gotta factor that into your max bid. Example, Auction.com’s buyer’s premium is equal to the greater of 5% of the Winning Bid Amount or $2,500. So, if the Winning Bid Amount is $200,000, then the Buyer’s Premium would be $10,000 (5% of $200,000). The Total Purchase Price is then calculated as the Winning Bid Amount + the Buyer’s Premium, or $200,000 + $10,000 = Total Purchase Price of $210,000.
Just FYI you’ll probably need $2k or more deposit (cashiers check) plus proof of funds in order to bid. Proof of funds does not, however, need to be in your name or your entity’s name.
Early in my property acquisition phase, I went to several auctions. I had picked out a couple of properties to bid on and also determined my max bid.
A large crowd at the auction lowers the chance of getting a property at a low price. Auction fever almost always drove prices up. I remember one HUD property that sold at auction for more than HUD had listed it originally.
Single property auctions conducted at the property site itself bring out the owner occupant bidders who naturally have a higher price point than the investor.
Courthouse auctions nearly always have someone present who (eventually) bids the amount of foreclosing loan plus costs.
After a couple dozen auctions, I decided they were great entertainment but poor purchse opportunities. Once the lender has “won” the auction, you will have a better chance of buying the property for less when the bank markets the property as an REO.
Agreeing with Dave T. I was gonna say that in my first reply. In a nutshell, the more people that know about a house for sale the more it costs. Same idea with listed properties.
The $2500 you’ll need to bring to a REDC.com auction would probably be better spent sending out yellow letters to free & clears or whatever.