Buying auctioned foreclosures

[Noah McPherson]

Hello BP,

I'm currently preparing for my first BRRRR deal in the Duluth, MN area, and I'm curious about a couple things. Forgive my naivety, as I'm just a beginner.

Anyways, I am considering pursuing a foreclosure (possibly auctioned). I read on my county website there is typically a contingency period on foreclosures, at least when using a regular bank. First, Is it typical to get a contingency with hard money? Second, Is it typical to get contingencies on auctioned properties?

Thanks guys

[Andy Sabisch]

Congratulations on making a move towards building your portfolio. 

A few things to consider when bidding on foreclosure properties.  Some states (yours is one) have redemption periods in which the former owner can recover the property after the auction.  Unless you are buying from a bank that has already bought it back and held it for the redemption period, you may be in for a surprise when the former owner exercises the redemption statute and you are out of a house.  You will get what you paid back with interest but any repairs are on you.  Pursuant to Minnesota Statutes, most properties sold in a mortgage foreclosure action can be redeemed by the mortgagor - this comes directly from the state website. 

The other thing you need to look into is the time to provide funds on winning an auction.  Many require it the same day which makes it difficult to get a HM loan especially if this is your first dance.  Talk to the lenders BEFORE you look for auctions so you are not wasting time finding a property only to find out you can't get funding on the required timeline. 

The other thing is if you are buying the property with someone in it, you will be the one that has to pay to evict the person.  We are in the process of that on a property we bought off an auction and it has taken 2 months and we still do not have access to the property - courts are backed up. 

Good luck and post if you have any other questions