Your take on auctions and how it works

[Alberto M.]

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I have been in real estate for over 6 years now. So far, I have been sourcing my deals the traditional way: MLS (I'm a licensed agent), brokers, direct sellers and so on.

However, due to the high demand and allocation requirements of some of my investors I had to start looking for deals elsewhere.

I joined real estate Facebook groups and started networking with as many people as possible.

Last week, I was offered by a wholesaler the possibility to purchase houses way below market value; and here is where I got introduced to Auctions.

I heard about it many times in the past but was hesitate to learn about it as it looked highly risky and competitive (you don’t get to do inspections, buy as-is, can’t enter the house until after you buy it, and so on).

What this person said is that these houses where foreclosed from people and now getting sold by the bank on the auction.

The way they say it works is:

A) you look at the house (form the outside and you are lucky if you find some pictures) and run your numbers.

B) if the deal make sense you send a “Agreement to Sell Real Estate” as the offer.

C) if it get accepted you have to pay and the house it yours.

Note: I was asked to put a 5k deposit to send the offer. I also was told that once you buy the house the property could have a tenant inside, a landlord that doesn’t want to leave (hence I would be responsible for the eviction process), and there could be surprises in the title, some hidden debt or in the conditions of the house.

When looking at the numbers it totally makes sense to go this route as you can get some really good deals on auction. However, I am still unsure about it based on the potential exposure and risks involve in these transactions.

Does anyone here have experience with auctions? Is there any piece of advice you could share? Do you think is worth trying?

I would be open to give some “consultant fee” to someone with experience that could take me throughout the process.

Thanks!