Bidding on a house sight unseen could be risky, but I’m taking a risk, anyone out their know how to buy online and have a buyer in place within days and make a profit, I know for a fact that this method is being done now,lets say that house in Georgia is selling for $80,000 I buy for $40,000 there is 40,000 in equity, I turn around and sell using auction.com for 6000 more than what I payed for leaving me with profit.
I’ve looked at some houses in my local area on auction sites. The house is put up for auction at a certain price and then if it doesn’t sell at that price it usually gets lowered after a few weeks. This process continues until someone buys it or they remove the listing. On the HUD website, they’ll list the value at the original listing price. So after the price gets dropped some, you could see a house they’re valuing at 80k, but it’s now listed for 55k. There’s a reason it didn’t sell at 80k. It needed too many repairs and it wasn’t worth that price. If these houses are staying listed on the auction site, some locals have probably already looked at it.
You know me and auctions. I have seen the TV shows of the guys that buy houses at auction and make tons of money in Phoenix. If you are designing your business model you have to look organically at what you are trying to do. You want to buy houses at the lowest possible price and sell them for market prices or below. If you are thinking of using auctions as the acquisition tool for your business you can buy houses that way but what does an auction do? Auctions are designed to sell houses for the most possible money. They don’t get you the lowest acquisition price and the due diligence is a whole lot less than you should do. You get to basically look through the windows and walk around them. The starting bid is a price anybody would buy but the prices tend to get to normal ranges pretty quickly sometimes on the first bid. So you end up buying a house for the normal retail price without proper due diligence. I would set up a traditional acquisition process to buy from motivated sellers or REO properties or HUD. I would attend some auctions and if I see a house that I know and the price is good and I can get it for a great price then I would buy it but it would be a side function and not the core of my acquisition plans. I say this as a guy that bought a house for $800 at an auction.
The difference in the auctions I’ve seen online for houses in my area is that I could actually go in them and check them out. The houses were also listed on the MLS just like any other house. On the one we bought, I didn’t even know it was an auction until we tried to submit an offer to the listing agent and he told our Realtor about the auction.
I watch Property Wars, but am not very impressed. Sometimes it looks like those guys are risking a huge amount to make a small profit. And as is everything in TV land, the wrap up at the end of the show provides “potential profit” - not what they actually sold for. I just don’t think spending 300k for a house that may provide 10k of profit is worth the risk (especially when you can’t see the inside).
If investors are going to auction.com and assuming the risk of buying sight unseen and the requirement of having cash they will want a huge discount. I wouldn’t use this as an exclusive exit plan.