Attempting our first Auction property

[Marc S.]

Afternoon BP Community.  

My wife and I are going to venture into our first RE property purchase. The house we found will be auctioned off on an online auction due to a foreclosure.  The history of the previous owner is very "clean" and was not a forced eviction and was an elderly owner who passed away.  The auction site is allowing a walk through of the property (very rare from what I understand).  We have our contractor meeting us to get a first look and get a good estimate to do a fix and flip.  My question is, should we also have an inspector meet us at the property as well?

Also, if we win the house, we have 30 days to do our DD and close on the property.  Am I mistaken in thinking that if we don't get an inspector to do a walk through with us then, we will do it if we win and if something is found we are allowed to back out? The auction site webpage says there is a deposit required to be allowed to bid, but does not say a "non refundable" deposit.  

Thanks BP. 

[Randall Alan]

Quote from @Marc S.:

Afternoon BP Community.  

My wife and I are going to venture into our first RE property purchase. The house we found will be auctioned off on an online auction due to a foreclosure.  The history of the previous owner is very "clean" and was not a forced eviction and was an elderly owner who passed away.  The auction site is allowing a walk through of the property (very rare from what I understand).  We have our contractor meeting us to get a first look and get a good estimate to do a fix and flip.  My question is, should we also have an inspector meet us at the property as well?

Also, if we win the house, we have 30 days to do our DD and close on the property.  Am I mistaken in thinking that if we don't get an inspector to do a walk through with us then, we will do it if we win and if something is found we are allowed to back out? The auction site webpage says there is a deposit required to be allowed to bid, but does not say a "non refundable" deposit.  

Thanks BP. 

I have bought multiple properties at online auctions, as well as in person auctions.   Frankly how are you describe it sounds very odd to me. The whole point of having an auction is to find an immediate buyer. Seldom, if ever, have I seen a 30 day due diligence period for an auction. Typically it is you do your due diligence the day of the auction (or the walk through), and then you are committed to buying it if you were the high bidder on the day of the sale.

I have seen it where you have 30 days to close, but not for the due diligence.  And that is only for auctions conducted by private auctioneers. For county run auctions, where it is a true foreclosure, at least in Florida, your final payment is due within 24 hours of winning the bid. So it is pretty much an all cash affair (no financing contingency)  And if you don’t come up with the cash the day after the auction, you forfeit a 5% deposit that you had to have placed in order to bid.

Usually the deposit that you pay to bid is collected on the day of the sale, and is not refundable. It is usually forfeited if you do not complete the sale. 

If you do not win the auction, obviously they do not keep your money. But if you are the winning bidder, they do keep it (at every auction I have been at). 
If you are a serious player, I would definitely follow up on all of the small details with the auctioneer prior to bidding to make sure you fully understand all the intricacies of the sale.

As for suggestions for bidding at an auction, make sure that you set what price you are willing to go to before the auction starts. It is very easy to get caught up in an auction and just decide that you have to win it! I’ve seen some people make some really poor decisions paying way too much for properties just to win the auction.

Usually we have a maximum price that we set,  and maybe we might go over one to two thousand dollars, but after that, that’s it.  If we get outbid at that point, it wasn’t meant to be ours, and it wasn’t a good deal.

If you are new to buying houses, be sure to look at the major expense items… The roof, the foundation, the plumbing, the electrical, the air conditioner.  Those five things could easily cost you an extra $30-$50,000 if they had to be replaced. Obviously you have to make sure to factor that into your bid.  Then don’t forget to allow for things that you might miss. We don’t buy a house that we don’t think that we can make at least $50,000 on after expenses. That way if there is a $20,000 cost overrun - and there has been for us - we still come out ahead and not on the losing end of a flip.

All the best

Randy