General bidding question for tax sales/foreclosure auctions

[Kate S.]

Hello :)

My name is Kate and I am a pretty long time lurker but this is my first post. I apologize if this has been posted elsewhere already, but my searching skills seem to be subpar today.

First my questions, and then some background info:

For those of you who purchase property at foreclosure and/or delinquent tax auctions, what percentage of property value (based on your valuation methods) are you usually prepared to bid, since you are not able to see inside the property in most cases?

Assuming the following:
-Title was searched and came back free of superior liens/judgments
-Outside of the property looks acceptable with no serious damage

Does this percentage change whether you are buying to hold, or buying to renovate and resell?

I ask because something like that seems so risky when you can't see the inside of a property or have it inspected. So how much of a risk would be considered a "safe" risk, knowing that the property may have been/or may be damaged during the eviction process?

About me: I went to school for accounting, and found myself in a job at a title company by chance, processing title searches, verifying documents, etc. Two years later, I am still there and loving it, and I've found that I love learning about real estate in general, and investing in particular. I am working for peanuts pretty much, but the learning experience is worth, it in my opinion, while I save money to go out on my own and try some things. I am pretty familiar with liens and other recorded documents because of my job, but I am curious as to the nuts and bolts and how people come up with their figures when investing in something potentially risky.

Sorry for such a long post, and thank you for reading!

Oh, can anyone recommend any good books to read for both tax auctions and foreclosure auctions? I would love to get my hands on more information.

[Donna Smolinski]

Yes, asume the worst. But also try to determine if it's vacant or occupied. If it looks vacant, chk the elec meter to see if it's running. If it's not, you can be pretty sure it's been vacated. Talk to neighbors to see if they've seen occupants move out recently. I've gotten LOTS of valuable info from neighbors, not only about the occupants, but also about the property itself (however, you can't always depend on this info to be accurate). If it appears to be occupied, we make several attempts at knocking on the door. Are they tenants or owners?? Are they aware it's scheduled for auction the next day?? You'd be surprised how many don't even know, because of all the previous postponements.

I bring up the occupancy issue here, because if it's vacant, you are going to be faced with alot more competition at the auction. Investors love it when they don't have to deal with evictions, so they usually bid higher than if it's occupied. Personally, we always try to avoid eviction and put serious efforts into CFK negotiations. It's a win, win if you can negotiate it. If it's tenant occupied, you will most likely need to honor their lease or give a 90 notice. Some tenants are willing to consider CFK, but usually at a pretty steep price. They have rights (as they should).

One more thing.... chk the websites and MLS. Often you will see an expired listing within the last year with interior photos. This doesn't mean the house is still in the same condition, but depending on how recent the listing is, condition may not have changed too much.

We've not been successful bidding on these for the past 6 months (competition has driven bid prices way too high now). I don't know the TX market. Maybe it's less competitive. If you proceed, pls let us know how it went. Just do as much homework as possible and best of luck to you :)

Welcome to BP!