Hard money for auction?

Question

So I read alot about real estate investing.  I was a builder about 10 years ago and did 1 flip that was a REO property and it turned out great.  I financed that project with a buisness line of credit.  Since then I left the business due to taking a job out of state.

I peruse the auction listings in my county and see they require the property to be paid in full by the end of the business day if you are the winning bidder.  How does a hard money loan come into play with this?  Do you target a property, research it and what not and propose the deal to the lender before you bid?  Will they fund you in one business day?

Thanks

James E. · Answer

@Jeremy England I'm not sure about Florida, but in MA you actually have 30 days to close, with a 10-20k (depending on property) deposit due on site if you win. I used hard money to fund an auction purchase with plenty of time (actually got an extra 30 day extension due to a title cloud).

Christopher Phillips · Answer

@Jeremy England

Has to be cash. Hard money takes 5-7 days to close (usually 7), with an inspection and appraisal contingency. Live auctions usually require same day payment and no inspections. So, hard money would be out.

Richard Elvin · Answer

I used Eastside for the flip I'm currently working on. It's expensive. They're decent to work with though, so far anyway.

Eastside is regional though, only PNW; although technically, they'll loan to you regardless of where you are (I'm in TN), but only on properties in Western WA.

@jay hinrichs knows more about Portland area, I wasn't aware Eastside loaned anywhere out of WA.

David Weintraub · Answer

Correct.

The key issue is the "recording of the deed".

In NJ, most counties ask for funds at the 30-day mark.  If you go past that you start paying interest, as opposed to losing the property/downpayment.  The deed normally gets recorded within 30 days, so when that happens a lender will fund your Sheriff sale transaction because with the deed in your name, you can get title insurance.  An instutitional HML is not going to fund your transaction if you can't get title insurance, and that's the catch.

This is why NO LENDER funds Philadelphia/Pennsylvania Sheriff Sale transactions, unless the lender has some type of very close, personal relationship with the borrower, and even then it's a stretch.

There's a lender who likes to claim they do this, and when I asked them how it was achieved, I was told, "We have a title company that's willing to issue a commitment before the deed is recorded..."

So...I called this title company and was told, "No.  We don't ever do that.  We refinance borrowers who use their own cash."

That's something everyone does.

In Texas, you need all the money the day of.  So you can't do it there either.

The BOTTOM LINE is simply this: find out when the county records the deed, and if it happens before all of the funds are due to the Sheriff, then you'll likely find a HML who will fund your transaction.

Period.

Julian Sibley · Answer

@Jeremy England There's a couple HML in my area that will lend at auction. A couple of them have reps at the courthouse every week. Most common model I've seen is they will charge an extra point or two if you need the money same day (i.e. at the auction)

Jeremy England · Answer

That does leave a wide door open for financing.  Not the case here unless I'm misinterpreting it.  This is from the local county website on auctions.

" if a party other than the creditor is the successful bidder, an immediate deposit of 5% of the bid is required. The balance of the bid and court registry fees (3% on the first $500.00 and 1.5% on the balance), must be received by 5:00p.m. on the day of the sale. Payment must be in the form of cash, certified check, or cashier’s check payable to Pam Childers, Clerk Circuit Court - NO personal checks or promissory notes."

David Weintraub · Answer

It is more common than some are letting on.  Some even tell you they lend at Sheriff sale in Philadelphia.  And then you call them, and you ask them, and they say, "Oh, no, we actually can't do that, even though we said we can..."

Jay Hinrichs · Answer

timber land does not go to foreclosure auction often or at all.. timber brokers will market it and open it up to a public auction style bidding process.. but these are not to be confused with distressed asset sales.

Darrell D. · Answer

@Jeremy England Thanks Jeremy.  I've been to the auction a few times but this is the first time I'm trying for a big one.  I might have to rally friends and family on this one.

Naveen Desai · Answer

@Jay Hinrichs, Thank you very much. I sure get that they would fund and sit in the A/C office and Mint.  For the person doing the work (& risking), it would only work on large value assets, and definitely not for 250K to 400K properties. Anycase, my interest is to keep the info handy and I might never have to use, but info at hand is always good.

I will have to discuss with you someday about lumber industry some day & buying lands on auction for that purpose!

Thanks & Sincerely, Naveen.

Hard money for auction?

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