Court House Bidding for Real Estate Investors

This is my first REI related blog post so bear with me as I try to make this as entertaining as possible. And yes, the expression is ‘bear with me’ not, ‘bare with me.’ I just looked it up to ensure my writing skills wouldn’t be less impressive than they already are but maybe I’m the only one who was confused about it.

Each Friday morning at the crack of dawn (7am) I attend a REIA sub-group meeting in Charlotte, NC, hosted by my boss and mentor, Wendy Sweet. Every week between 35 and 60 people attend for breakfast, prayer and 45 minutes of REI education. If you’re a new investor like me and you aren’t attending your local REIA meetings and sub-group meetings, Wendy always says, “They are the cheapest education you can get.”

Today’s speaker, Tim Johnson, heads bid services in North Carolina for auction.com. If you aren’t familiar, auction.com handles the sales of bank owned and REO homes as well as foreclosure sales. Johnson’s job is not to sell but rather to educate real estate investors.

Side note – I’ve never participate in an auction before and this information may seem very elementary for some. The information is also particular to the state of North Carolina and auction rules and guidelines vary in every state. That being said…

Step One – Finding a property

Once you have found a property whether it is on auction.com or elsewhere, you must do your due diligence. With the purchase of an auction home, you can inherit tax liens, HOA fees, and other hidden costs you may not be willing or able to take on. For between $150 and $300, you can hire a law firm to look into the property for you and provide you guidance on the deal.

Step Two – You feel good about the property after doing your due diligence and decide to attend the auction / or the deal is no good and you walk away

In the state of NC, you do not have to register for the auction. However, you want to come prepared with a cashier’s check for 5% of your maximum bid written out to the closing law firm. Cash is not always accepted.

Step Three – You win the bid and enter the NC 10 day upset period / or you lose and walk away or choose to place an upset bid

In NC, there is a 10 day upset period after you have ‘won’ the auction. This period gives other individuals the opportunity to out-bid you as long as they bid 5% over your winning bid. If you’re interested in placing an upset bid go to the Special Proceedings office in the county where you can pull files and inquire about placing an upset.

Step Four – 10 day upset period is over and you have won or been outbid

If you have won, wait 72 hours before tracking down the law firm for closing. It takes time to get paperwork done and you may not be a top priority. If you have been outbid, you will be refunded your 5% (eventually). If you have not been out-bid, you now have a new home and your deposit is non-refundable. Ever.

I realize this is a very bare bones outline of bidding on auction properties. Please feel free to comment on your experiences with bidding at the courthouse or online. I will expand on this topic in another blog post.