How to buy at an auction for foreclosures

[Trevor Richardson]

I miss anything courthouse steps veterans? I know you are out there.

1. Find source of auctions coming up

2. Build a model to manage and underwrite those properties coming to auction

3. Research and underwrite the properties while keeping the list up to date on the properties coming up

4. Going to need a lot of title research, flip and construction numbers, rental data and ARV data

5. Drive the properties right before the auction to finalize your construction budget

6. Pull out straight cash in cashiers check for the auction day (if your max bid is $400,000 you need to take $400,000 out in cashiers checks) to the courthouse. Better have your numbers, max bids and research 100% complete. If you make a mistake there is no going back if you win a bad deal

7. Hope one of the properties comes up and under your max bid…many properties that you worked a lot on will cancel or never go to auction

8. You will need to outbid other really experienced investors there, it’s nasty at the steps, they don’t like rooks

9. You probably don’t get something and have to get the nerve back up to continue the above process day after day till you do win a property

Good luck!

[Trevor Richardson]

Quote from @Michael Powell:

Can we talk about #4 a bit more?  As far as title searches go.  Should I pursue an attorney (what’s best way to go about this?  Have them search 1 property or all that I’m interested in?) or would a title company generally be sufficient?  Thanks!

What your going to want from title research is basically a clear path to hold clean title free of encumbrances, liens, and anything else that could cloud the title.
 
The title/escrow company won’t provide insurance on the close like a standard transaction. You will have to figure out how to “clear the title” without a typical escrow. Talking to a real estate attorney before would be a wise step. 

Here are a few of the biggest things we look for.

- 1st deed sale - if you are buying a 2nd deed you will have to pay off the first. You want to avoid this. This is critical in making sure you are buying the right note going to the auction. You have to make sure the note going to sale is a 1st deed of trust.

- Pending Litigation (Lis pen) - This means there is pending litigation. If you buy the foreclosure you are going to get looped into this so this is typically a “pass” property. 

- Liens - And any liens or back taxes that you would need to settle after you win at the steps. So if there is $14,000 between those two you would take those off the max bid. Or if there is a $60k mechanics lien maybe it’s a “pass” property.