Auctions - Or did I make a good deal? I am very confused.

[Edward Briley]

Hello Everyone, 

I am someone that have acquired properties buying REO properties, or private sale. Today, I was talking to my attorney and asked about buying properties at auctions. The first thing, which I knew, that buying at auctions could be very risky. He also told me that basically the same people show up at every auction. The good news is that you could still get a good or better deal on a property provided you did your homework. (This includes a title search). Matter of fact, he told me that I may be able to acquire properties faster, and for less money than waiting for an REO. However, on the other side, the bank may not accept the offer at an auction, and you may find it in REO for less money than what you bid on the property. This was a very lengthy discussion why, but it made sense. Now you must remember that if you buy a property at auction, you may have to file the papers for eviction etc... Not to mention to living up to leases the prior owner may have made with a tenant. It is not unusual here for a real estate company to pay a tenant to leave the property.

Now after further picking his brain for awhile, I asked if it was possible to do pre-auction title searches on properties, and how much would it cost?  Well, I know online you can do them for around $140, but of course I could not see in paying that much.  Now the deal that I made with him, was very inexpensive in my opinion. I don't wish to disclose the prices, but he gave me 2 options.   

The first was doing the title search back on the property to the start of the neighborhood, for one price that is higher, or doing the present owner only, which is more reasonable. Either way I choose, he will deduct that from the cost he charges for closing on that property. 

Now, my question is, am I safe enough by going back to just the present owner, or should I pay the 50% higher price to go back to the neighborhoods inception?  

Now I will tell you this, that I may have them do up to 5 title searches for me a week, and I will only expect to get one of the properties at auction of the 5 title searches I have paid for. 

What would you do?

[Leigh C]

a title search that isn't all the way back will only catch about a third of your problems.    Lots of sales in the bubble weren't done correctly. 

As for choosing 5 properties and actually buying one is laughable.     After years of going to the auction I might be able to pick 10% of the time correctly which are going to be actually sold.   A newbie has a 1 and 100 chance I'd guess.    I got to the point where i didn't even bother to look at the property since the cost didn't justify the added layer of protection.   Margins like anywhere else get thinner and thinner to the point where the risk and reward barely are balanced.

His title search is also something that isn't worth much.   He isn't offering you title insurance, he is simply giving you a search without any guarantee of the quality of his service.    Title search=borderline worthless   Title insurance=protection to a certain dollar amount.     Go hang out at the auction for a few weeks and backwards lookup what ends up being sold.    Then decide if you want to invest your time/energy once you understand the quality of the buys.     Keep also in mind, you have to pay more than they did, lots of guys use to drool over the deals I got at the courthouse steps, i use to remind them they didn't have that option as i would of bid 10-20k more