Since there’s no way to know the true condition of properties you bid on, you mitigate this risk by pricing the work they may need into your calculations. Plus, it’s not uncommon for owners to trash a place after defaulting, so there’s always a chance that properties bought at auction will need some serious work. Unlike REO sales, you won’t have a chance to walk through the home or have it inspected. When buying a home at auction, it’s impossible to know the true state of the property.
Buying foreclosed home at auction forum how to#
Related: How to Buy a Foreclosure: A Guide for Finding & Landing Foreclosed Deals Risk #2: Property Condition
I know of people who have bought the wrong property due to list inaccuracies, so it’s crucial to scrub property information for mistakes before bidding at auction. The problem with this is that the process of digitizing property information is prone to human error. In most cases, the businesses offering these services resell information after gathering printed data and digitizing it. While this low-tech approach to auctioning off foreclosures is slowly improving, most bidders still get information on properties from foreclosure list services. In our upcoming book, Bidding to Buy, we detail the foreclosure process and the pitfalls to avoid when bidding on distressed property.īelow, I highlight five of the biggest risks associated with buying foreclosures at auction and offer ways to mitigate these risks based on over a decade of experience and 700-plus successful foreclosure flips.Īuction notices are typically printed on paper and posted at courthouses. The best way to mitigate risk with foreclosure purchases is to hold off on buying until you truly understand the process. What I’m saying is that you should know what you’re doing first. Things can go wrong, and when they do, they can cost you big.īut that’s not to say that you shouldn’t pursue foreclosure flips as an investment strategy. If you’re a new investor or new to foreclosures, it’s important to remember that buying property at auction is risky. Related: How to Successfully Market to Homes in Pre-Foreclosure The Risks of Buying Foreclosures at Auction The process seems somewhat simple now, but looking back, it definitely didn’t feel like it at the time it was confusing, and I was constantly worried that we were just one costly mistake away from failure. We sold these properties for significant profit and built a new business based on these successes. Ultimately, we did buy the foreclosure my partner found the day it was auctioned off.
If a bidder buys a foreclosure on the courthouse steps, that property will never hit the MLS-at least not until the buyer is ready to resell it. It’s only the properties that fail to sell at auction for one reason or another that turn into REO foreclosure listings. We were competing with countless buyers when the real deals were closing much earlier in the process at auction. We were starting to feel like foreclosures were a waste of time.įinally, thanks to a partner’s chance discovery of a foreclosure that wasn’t listed on the MLS, we realized we had been looking in the worst place for deals on foreclosures. Considering how fast home values fell, we thought we’d be able to jump in and land some great deals right away.Īfter weeks of searching the MLS for foreclosed properties and writing hundreds of offers, we had yet to buy a single foreclosure. With our experience, flipping foreclosures seemed like a relatively easy way to make money. After the housing crash in 2008, home building was a dying business-one that my partners and I needed to replace with a new source of revenue.
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