Want to purchase an auction.com home using a hard money loan

[Jonathan Norris]

I am new to investing.  I am looking to gain knowledge about auctions.  I would like to bid on a home through auction.com.  I would like to use a hard money loan to do so.  I don't understand the process, so I need help.  My hard money lender stated to me that they would need 30 days as well as an appraisal.  How is that possible when you don't have access to the house.  I read some information on auction.com that was related to this situation.   This particular page gave a step by step look into the bidding process.  It states that an appraisal would take place after you have the winning bid.  What if the appraisal comes back and the bank offering the hard money loan decides not to provide you the loan?  Will I lose my money that was given towards the down payment?  I just want to understand more exactly how a hard money loan can be used to purchase a home on auction.com

[Patrick Prunty]

@Jonathan Norris

I have purchase many homes from auction.com and the associated foreclosure sales.

First, there are a couple of different auction types that take place on Auction.com, Bank Owned (REO), Foreclosure Sale (Trustee/Sheriff Sale), etc.

If the auction is for a Bank Owned property, i.e. not an actual Foreclosure Sale (Trustee/Sheriff Sale) then using a loan to finance the purchase is no problem (auction.com and the bank/seller take way more than 30 days to close these types of transactions).  In this case, however, you still won't be able to get an appraisal because you still aren't 'legally' able to access the property during the escrow...further, the prior homeowner or tenant may still be occupying the property and in this case they can be very adverse, require legal eviction, etc.  

If the auction, on the other hand, is a Foreclosure Sale (Trustee/Sheriff Sale) then using a secured, non-JV type loan (which requires title insurance and a recorded lien) to finance the purchase is not possible.  Foreclosure Sale auctions, whether live or online, require cash money, generally very quickly (often the same or following day).  With this in mind, no lender, other than a JV type, equity/money partner is willing to risk putting up the cash when you haven't probably seen the house, don't have the ability to get title insurance, record a lien, etc.  In this case, the only way to purchase at an Foreclosure Sale (Trustee/Sheriff Sale) is with your own cash or a JV type equity/money partner.  Once the Foreclosure Sale (Trustee/Sheriff Sale) purchase closes (and you get the deed recorded) you can then pull hard money to get your cash, or your JV type equity/money partner cash back via refinance.

Second, if the lender needs 30 days and an appraisal, you need to find a new hard money lender...

Good Luck!