How to buy an auction property?

Question

This is probably a dumb question, but I have been looking into auction/foreclosure properties and am not sure if I have to pay cash or how that works. Is it possible to just get pre approved for a loan? Could someone please explain to this newbie how all that works?

Account Closed · Answer

Account Closed,I love auction/trustee sale. There's no blind bid like a regular sale. You know how much your competitors are willing to pay, and the highest bidder wins. Simple as that. As much as we're all friends before the auction, when it comes down to bidding, it's all business. The reason I don't respond to these posts is because the laws are varied from state to state. I hate giving the wrong information to the wrong party. Some states are judicial foreclosure while others are non-judicial.In my state, you pay cash on the spot. You show up to the sale with cashier's checks payable to yourself. Once you won the bid, you endorse the check(s) and it over to the auctioneer. S/he will write you a receipt. It's a high risk and high reward business. It comes down to title search. Know what to look for, know which liens have to be paid, which can be negotiated, and which get wiped off the title. How do you go about forgetting these liens removed or settled. How to know the interior conditions of the property prior to bidding. How to get the tenant or current owner out of the house without them setting the house on fire or pour concrete down the sewer line, etc.....I love it because it's an open bid 98% of the time. Occasionally, the auctioneer is bidding on behalf of the lender. On other occasion, some deals just go under the table. Gasp! Yep, the auctioneer got bought out. What are you going to do? Does it worth the risk to follow suit? :0)There's a lot more and it would take me tens of pages to write everything. Have fun learning and investigating this auction/trustee sale business. Best of luck.

Account Closed · Answer

Thank you all for your help and the information! I will just have to keep digging. And yes my question was based off some online auctions I've been eyeing. (Auction.com)Thanks again. I at least have a few things to look in to!

Account Closed · Answer

@Ryne Ray,I have attended live trustee sale auctions which was hosted auction.com, but have never bought anything there. I believe my partner David C. has bought some houses on hubzu. There are two types of auctions. Trustee sale and REO auctions. Based on my experience with REO auctions, you would get clear title on the property, but you don't get the much of a discount. In addition, you have to pay 5% buyer's premium. With trustee sale auction, you buy it as is where is without title insurance. It's your job to know the title of the property and which warts come with it. Due to uncertainties, you get the discount, and you DON'T have to pay the 5% buyer's premium. However, it's your job to vacate/evict the existing tenant/owner so knowing your state laws is a must so you don't et in trouble.Since I live in CA, where it's more tenant friendly, not knowing my state laws has negative consequences. When approaching an existing tenant/owner, knowing what to say is critical in getting them out of a house without leaving you a mess. It's not what you say, but it's how you say it. It's more of an art when you approach these people who are in distress. It's a fun and reward journey so don't be cheap on the education, or the price to pay is quite steep. :>)

Matt R. · Answer

I've never bought property at an auction. I have looked at some properties near where I live (or used to live) that had "auction on the 25th" signs pop up on them, just out of curiosity.Usually, the auction company will have all the details for the property on their Web site. This includes how they want to get paid - all cash at the end of the live auction, or so many percent down and the rest within a week, or whatever. This can vary for different kinds of properties (commercial, residential) and also for what they think the property will sell for - they might ask for all cash for something that sells for around $10K but give you a little time to come up with $200K. If there are back taxes owed, you might have to pay the taxes to the city/county and the purchase price for the property to the auctioneer... stuff like that.I get the impression that they mostly don't care whether you had the cash in your pocket already, or got it from a loan, or whatever. They usually do ask for some kind of certified funds, like a cashier's check.If it's a live auction, there is usually some time on the day of the auction where you can look at the property, ask questions, etc before the actual bidding begins (the part with the auctioneer talking real fast). At least one of the auction flyers I've read encouraged people to visit the auction even if they didn't plan to bid, just so they could see how it works - probably angling for future customers. :)My suggestion would be to make a note of the next two or three "real estate auction" signs you see around your city, look them up online, and maybe visit one on auction day to see how it works.

Percy N. · Answer

Are you referring to online or live auctions? Generally with both you need to pay a deposit of 10%-20% upon successful bid immediately, then the rest in 5-10 days depending on the auction rules. Sylvia Hanna, you need to do a title search before you bid. To get tenants out you have to offer cash for keys or start an eviction process.

Percy N. · Answer

Are you referring to online or live auctions? Generally with both you need to pay a deposit of 10%-20% upon successful bid immediately, then the rest in 5-10 days depending on the auction rules.

Ryne Ray · Answer

I always see alot of houses on auction.com or hubzu that I'd like to buy. Nothing would kill a deal like liens I didn't know 'Id owe.

Sylvia Hanna · Answer

I'm very curious about auctions as well. Someone I work with bought a property on an auction site with hard money and I went to a live auction in a town hall once and the people who one the bids bought with cash (bank checks). I believe this is a must. I am wondering though.... When you buy the house you are responsible for whatever else comes with it. There might be tenants linving there and there may be liens on the property and you would be responsible for both! You would also be responsible for anything that is wrong with the house. How does that part work? How do you get the tenants out if they don't want to leave? How do you know if there are liens you are responsible for? I don't think you can get an inspector in there to tell you what is wrong with it before you actually own the house. So you would have to have the money ready to fix whatever has to be fixed. I don't think the auctions are for me just yet, but very curious about the process.

Ryne Ray · Answer

I am also curious to this. I'll take it a step further and ask about cash only auctions. Can you use hard money as your cash?Thanks,