Has Anyone Purchased Auction Homes

[Nik Farooqui]

Has anyone purchased homes off of auction sites or even in person? How was that experience and was it worth chasing auction homes and trying to rehab/flip those?

[Frank Chin]

@Nik Farooqui

I bought 3 properties at auctions during the real estate downturn in 1992-1993. One is a duplex I currently live in since 1993. The market price at the time was $325K and I purchased it for $208K free and clear. Currently the ARV is $1.5 million. It was bought at a public auction where nearly 200 properties were auctioned off one by one with an announcement that the first six will be sold absolute, meaning the successful buyer with the highest bid will be accepted. The REO bank had loan officers at the auction and approved a $180K mortgage. I gone to auctions where this is not the case and was notified later my bid did not meet the reserve price and rejected. If not sold free and clear, the buyer will also be responsible for paying back taxes.

I bought a condo at another public auction for $40K where the market price is $130K in 1993. A developer did a conversion where a high school was turned into 104 condo units. They had 60 vacant units sold at the auction and only managed to auction off 30 of them. I put down $8K and the REO bank gave me a $32K mortgage. I put my sister who lived in section 8 housing as a 40% owner on the deed and she moved in paying the mortgage which was much less than the rent she was paying in rent. She later remarried, paid off the mortgage and I gifted my part ownership to her and still lived there. I approached the REO bank that owned the condo complex a year later when they're still stuck with 30 units and got another one for $40K. They wanted $65K but agreed to 40K after I rejected $65K pointing out the units had been vacant for several years. It was sold 10 years later for $110K with my sister acting as PM as it's out of state.

Back 1n 1992-1993 there were pages and pages of auctions advertised every week, and in 1992-1993. I attended a number every month totaling 50 plus of them over 2 years. There were on site auctions where it was held in the auction unit, courthouse step auctions, and public auctions where a large number are sold. Court house step auction was a waste of time as the REO bank would step in and bid a price equal to the mortgage when they did not receive a bid equal to the unpaid mortgage.

The other issue is I often cannot view many of the properties as they have squatters. The duplex I bought at the auction had two open houses and I attended both of them with the property in perfect condition.

I hear stories of people getting lucky at auctions. The complex where I bought condos at auction had a condo sold at an on-site auctions by a foreclosing bank when the owner fell behind on the mortgage. My sister attended, and the foreclosed condo owner attended with his twin brother to watch. It was a badly organized auction and supposed to be absolute. Turned out no one came to bid, and it was absolute. When the twin brother of the owner realized this, he put in a bid of $5,000, and because there is only one bid, it had to accepted. This happened when the market price of the condo was over $100K, and he got it for $5K. The condo board was so upset over this, as it would ruin the market values of its condos, the bylaws was changed to prevent such occurrences.

By the way, I attended many on site auctions where no one else came to bid.