Do you have experience using a private money lender for foreclosure auctions?

[Chris King]

I am wanting to purchase properties to flip at foreclosure auctions in my area. I have spoken to PML that fund flips and they aren’t sure how to lend for auctions. The issue is funds are due immediately after winning the auction in the form of a cashiers check. The auction price can vary, but I would have a max purchase price for a property beforehand. The deed takes up to 30 days to receive from the trustee. So no lien can be recorded until the deed is received. Anyone have experience with PML for auctions? 

[Michael J.]

You will likely need to come up with the 5% deposit required at the time of winning the auction on your own. If you have access to a line of credit on your primary home, that could be a good option. Alternatively, you could take a loan against your 401k for that initial amount.

Once you’ve secured the property and paid the 5%, you can then work with a private money lender (PML) to close on the property once the deed is ready. 

[Chris King]

Quote from @Michael J.:

You will likely need to come up with the 5% deposit required at the time of winning the auction on your own. If you have access to a line of credit on your primary home, that could be a good option. Alternatively, you could take a loan against your 401k for that initial amount.

Once you’ve secured the property and paid the 5%, you can then work with a private money lender (PML) to close on the property once the deed is ready. 

 I have been told that 100% of the funds are immediately due with a cashiers check upon winning the auction. 

[John Bowens]

I have done Private Money Loans on auctions in the past. I should preface this with, this is not an open door for me to loan, I do not offer my private money loans through this forum. I used my Self-Directed Retirement Accounts to loan on several sheriff sale auction properties in the past. I had  my borrower sign the promissory note and mortgage and then I went to the county recorder to record the mortgage. Likely best to have a real estate attorney handle this all for the private lender, unless they have experience or can navigate that process themselves. The attorney can assist with drafting the documents and recording the mortgage/deed of trust. 

Some private lenders are not willing to loan on auction properties, given the additional nuances and potential risk. 

[Michael J.]

Quote from @Chris King:

Quote from @Michael J.:

You will likely need to come up with the 5% deposit required at the time of winning the auction on your own. If you have access to a line of credit on your primary home, that could be a good option. Alternatively, you could take a loan against your 401k for that initial amount.

Once you’ve secured the property and paid the 5%, you can then work with a private money lender (PML) to close on the property once the deed is ready. 

 I have been told that 100% of the funds are immediately due with a cashiers check upon winning the auction. 

 It may vary by county.  My county its 5%

[Jay Hinrichs]

Quote from @Chris King:

I am wanting to purchase properties to flip at foreclosure auctions in my area. I have spoken to PML that fund flips and they aren’t sure how to lend for auctions. The issue is funds are due immediately after winning the auction in the form of a cashiers check. The auction price can vary, but I would have a max purchase price for a property beforehand. The deed takes up to 30 days to receive from the trustee. So no lien can be recorded until the deed is received. Anyone have experience with PML for auctions? 

YUP very easy work around for this but it does take a lender who will be a little less risk adverse than bigger HML that will simply say no title insurance no loan.. But this does and can happen.  Especially here in OR and WA.

[Jay Hinrichs]

Quote from @Michael J.:

You will likely need to come up with the 5% deposit required at the time of winning the auction on your own. If you have access to a line of credit on your primary home, that could be a good option. Alternatively, you could take a loan against your 401k for that initial amount.

Once you’ve secured the property and paid the 5%, you can then work with a private money lender (PML) to close on the property once the deed is ready. 

WEst coast  OR WA AZ NV CA etc is all cash on the barrel head there are no deposits and no over bids.. winning bidder presents the cashiers check and they have won the deal on the spot. Each state is different as you noted.. the OP is in Oregon so thats how that works..
So you have a gap between handing your check over to the Cryer for the sale and when you get the deed and there is no title insurance.. you can buy aftermarket after the fact title insurance but if there is any gotchas on title when you bought those will be exceptions.

[Chris King]

Quote from @John Bowens:

I have done Private Money Loans on auctions in the past. I should preface this with, this is not an open door for me to loan, I do not offer my private money loans through this forum. I used my Self-Directed Retirement Accounts to loan on several sheriff sale auction properties in the past. I had  my borrower sign the promissory note and mortgage and then I went to the county recorder to record the mortgage. Likely best to have a real estate attorney handle this all for the private lender, unless they have experience or can navigate that process themselves. The attorney can assist with drafting the documents and recording the mortgage/deed of trust. 

Some private lenders are not willing to loan on auction properties, given the additional nuances and potential risk. 

 The issue I have ran into is the mortgage cannot be recorded until the deed is received from the trustee. They have up to 30 days to provide the deed after winning the auction. 

[Chris King]

Quote from @Jay Hinrichs:

Quote from @Chris King:

I am wanting to purchase properties to flip at foreclosure auctions in my area. I have spoken to PML that fund flips and they aren’t sure how to lend for auctions. The issue is funds are due immediately after winning the auction in the form of a cashiers check. The auction price can vary, but I would have a max purchase price for a property beforehand. The deed takes up to 30 days to receive from the trustee. So no lien can be recorded until the deed is received. Anyone have experience with PML for auctions? 

YUP very easy work around for this but it does take a lender who will be a little less risk adverse than bigger HML that will simply say no title insurance no loan.. But this does and can happen.  Especially here in OR and WA.

 Can you walk me through this? My PML has asked me to provide a proposal. I'll need cashier's checks for varying amounts the day of the auction. The deed is not provided at the auction, so how is the loan secured? Is a promissory note enough? Then record deed of trust when I get the deed?   

[Aron Sperber]

Quote from @Chris King:

I am wanting to purchase properties to flip at foreclosure auctions in my area. I have spoken to PML that fund flips and they aren’t sure how to lend for auctions. The issue is funds are due immediately after winning the auction in the form of a cashiers check. The auction price can vary, but I would have a max purchase price for a property beforehand. The deed takes up to 30 days to receive from the trustee. So no lien can be recorded until the deed is received. Anyone have experience with PML for auctions? 

 Hey Chris, Let's connect and discuss this in more detail.

[Tanner Lewis]

I would close in cash/with a HELOC and then do a refi with a hard money loan. It's hard to use hard money on these since you typically need an inspection of some sort.

[Jacqueline Wright]

Chris, purchasing properties at foreclosure auctions can be challenging when it comes to using private money lenders (PMLs) due to the immediate payment requirements and the delay in receiving the deed. However, there are strategies and approaches you can explore to make this process smoother.

If your PML is hesitant to fund directly for auction purchases due to the risks, consider structuring a partnership where the PML becomes a joint venture partner. In this scenario, they are investing in the auction and can take a share of the profits rather than operating as a traditional lender. This may alleviate their concerns about the timing of the lien.