Wholesaling Auction/ Foreclosed homes

[Markia Dunn]

How do I wholesale foreclosure/ auction houses? I hear around that it’s possible, but wouldn’t I have to pay up front if i win the bid? 

[Isaac El]

@Markia Dunn  Hey Markia, I go to 3 foreclosure auctions here in New York, every week.  The guys that are winning the most properties are wholesalers.  They are very aggressive in the auction, there are lots of theatrics going on.  When they snatch a good deal (and they do) in NY (I know every place is different) but in NY you have to put down 10% of the bid in cashier check/money order or cash to the referee appointed by the court.  They then turn around to all investors in the area and try to flip the contract for $10,000 - $20,000 in some cases even $100,000 more.  They don't intend to close on the property, only flip the contract.  Its very popular here, and unfortunately whats driving auction prices so high so it becomes harder for others to get a deal.

So for example, property has ARV of $650,000. Some investors will pay $475,000, in auction the wholesalers will try to snatch it for $430,000 (There are all sort of reasons why this happens, maybe it was the last item at the auction and people used cash and bought other items, maybe somebody was a second too late and the auctioneer didnt get their bid - in NY the auction goes SUPER fast) so they buy it for $430,000 and give a check or cash for $43,000 (now they have contract) they reach out to everybody and offer the property for $450,000 so to the investor paying $475,000 $450,000 is a great deal. They assign their contract for $20,000 plus the $43,000 deposit they put, and now the new investor closes at $430,000 with the bank + $20,000, so that investor paid $450,000 and everybody is happy.

That's how it works locally here, I have looked up foreclosure auctions in other parts of the country and there is way more opportunity to make money wholesaling at auction, just because how the auction is set up process wise.

Best of luck, hope that helps!