I’m new at this but I would like to buy at a foreclosure auction. The house is worth anywhere from 130,000 - 150,000. The starting bid is probably going to be around 30,000. What are things I should find out about the home before the auction? What should my max bid be?
I do not want to do this wrong with this being my first time.
Thanks
First off find out what the house is worth, anywhere from $130k-150k isn’t a close enough answer. $20k is a lot of money.
My best estimate is 150,000
Is that a straight estimate or is that from accurate comps?
Straight estimate.
You want to dig a little deeper into that value and have a realtor run some comps for you, a $20k difference may mean the difference between profit and no profit or worse a loss.
Let’s just say for now that is the case. What is my max bid and do I need to do anything else like talk to an attorney, go look up additional records on the house or what? Can the property be auctioned with additional liens against it?
I think this is alittle to good to be true. I doubt if the property makes it to auction. I have 6 more days.
First, run a title search (or pay someone to do it). If it’s starting at $30k, but worth ~$150k, I’m wondering if this is actually a SECOND mortgage being foreclosed, so you have to consider the cost of the first in the total (you will have to buy out the first, if that’s the case).
Assume the house will need work, since generally, foreclosures do. I NEVER go more than 65% of current value. Some people go higher; it depends on how much time and resources you have for fix up.
Learn the foreclosure rules for your state. How soon before the auction can it be cancelled? In VA, the owner has until the day of the auction to bring their account current and save it, but some states have a 5 day window. Is there a right of redemption? In some states, original owners have a window AFTER the auction (of as long as several months) to buy back the house. The new owners get back what they paid and interest, but not any money invested to fix it up.
I usually recommend people new to foreclosures go to some auctions first to watch, and see how it goes, rather than bidding at the first one. It’s not always possible (I have to take time off from my “day job” to go to auctions, so I understand), but it’s good if you can.
ETA: Before you go, decide your max bid. And then stick to it. It’s very easy to get caught up in “it’s only $1k more”, and before you know it, you’re way over where you want. Bid to the predetermined amount (I write it down so I can’t fudge – I know myself too well 
) and then stop.
Sure, you can pay $150 for a title search. But the reality is that the majority of foreclosures end up cancelling. So if you lay out $150 for every decent prospect you will likely spend a lot of money before you are successful at auction. You need to learn to do your own title searches. The information is publicly available at your county recorder / hall of records / whatever it is in your jurisdiction.
I work with a title company that charges me $50. I met the owner of the company at an auction.
To do title searches myself, I have to get to the courthouse during business hours. If it takes one hour (conservative for beginners), and 2 hours of commuting from my office, I’m out three hours of work. My hourly rate is higher than that, so it makes more sense to pay someone.
But not at $150.
I understand why you want to buy at an auction, I felt the same way when I got started. Someone told me to go and just observe what goes on there, and I’ll understand more. Well I went, and so did 30 other local investors. I got the picture. Its very competitive, and usualy there is a few guys/gals there that do it full time (the pros). Thease are the ones who buy the majority of the properties for sale. If they were not bidding, I would worry, they must know something that everyone else should. You must do your due diligence, look at the property, is it vacant, what are the comps, whats the market doing, how are you getting the deposit?, youve got 15-30 days(if your the high bidder) how are you going to pay for it? whats your exit strategy, whats plan “B” if that wont work?, What repairs do you need to do?, did the owners trash it out, How long do you expect that to take… Thease are just some of the things you need to think about. If you plan on using hard money, you have to make sure that you stay below a cap on your bidding price to ensure it will qualify for the HM, Line up lenders or private money ( if you don’t have your own ) Its not to good to be true, its just alot of work and not as easy as it may seem. My strategy is Pre-foreclosures & ugly houses. Thease are all things you need to consider, write them down and learn as much as you can, from everything, and then take massive action!
Good luck and god bless.
DM