All Forum Posts by: Sebastian E.

Thanks @Ned Carey I recognize your name from my Baltimore days. Thanks for the information that is helpful.

@Bruce Lynn it is indeed a tax lien sale and the sale just happened, so I am working with what I got. 

ok gotcha

These laws would prohibit me from reaching out to sellers?

Has anyone had success purchasing a property during the redemption period after a tax lien sale? I have the list of properties that were auctioned at the tax lien sale and I am thinking about reaching out to them to see if they would be interested in selling. I understand I would need to factor in the unpaid taxes but is there anything else that I am missing? Would appreciate some insight from some of the seasoned tax lien folks. 

Thank you!

I think you are feeling what a lot of people are feeling to be fair. I am at a similar inflection point where either I pull back or push through, which in my case means investing into some of the lead generation techniques you mentioned in order to be able to scale the business. It is not without risk of course and like you mention there may very well be other investment vehicles that could be more preferable for your circumstance. There are lots of ways to make money--RE is just one of them. 

One other thing to note about the REO online auction is that most of the time they have a reserve and will keep running the auction and slowly over time reduce the reserve if it does not sell. I believe this is done through an algorithmic process based on time on market and potentially the previous bids. This means that a property can theoretically keep getting re-auctioned until the bank gets the reserve price they are seeking. I don't know the inner workings of how they get to that reserve price because I do not think it is strictly based on the amount of debt they are seeking to recoup. My sense is that they get a local broker to give an estimate of the value of the property and use that number. I saw one in my market recently that I think was taken back by the lender around 225 and they relisted it for 300. Brokers who list these kinds of properties may have better insight into that part of the process.

Yes it is a legitimate website. There are a few different kinds of listings on there which I suppose is the first thing to be aware. Some of the listings will list as an in person auction, usually at a courthouse, which is a foreclosure auction. This means the borrower has defaulted on the debt and lender has gone through the legal process of foreclosing on the property. Almost always the starting bid at the auction will be the amount that is owed on the note plus the amount in arrears plus any other applicable fees and penalties. If that number is more than the value of the house at present there will be no bids (usually sometimes someone may buy it above the value for whatever reason) and the bank will effectively take the house back. It then becomes an REO (bank owned property) and they will dispose of it months later either again through auction (oftentimes on auction.com) or by listing it with a broker local to the area. Years ago these prices were oftentimes below market rate because the properties are often neglected. In my market, I am seeing those prices more correlated with market rates today. Some of the HUD homes (FHA federally backed mortgages) which are properties that have been foreclosed on even get renovated and then resold at market rate, (you can find those on hudhomes or homepath) so these are very rarely good deals as they expect retail values when they sell them. If they end up on auction.com as REOs they usually have a 2 day online auction to dispose of the property. There are also occasionally normal private sellers who list properties on there as well but that isn't as common. So that is for the listings as such.

In relation to your question of things to know as a new investor, the most important one is that you generally (there are exceptions) have to purchase these properties in cash. Either you have that cash on hand or have an established relationship with a private lender who is willing to lend you the money. Time is of the essence in that case because if you are not able to come up with the money within the timeframe of the contract you risk the loss of your earnest money deposit. Years ago I was able to get traditional financing on a property that I bought on auction.com but this is very risky because theoretically you can not enter the property until after you have closed and a traditional mortgage lender has to enter the property in order to conduct an appraisal of the property and they wouldn't be able to do that if they can't enter. The same is true if the utilities are turned off for example.

So the most important thing to know in your case is that you either have the cash ready or a source ready to lend you that cash otherwise it is a non-starter. 

I hope this helps.

What is specifically that you want to know about auction.com?

It is also possible that this contractor is milking you because he is local and you are across the country in a rich area. This creates a misalignment of interests where your objective is to make as much money as you can and he is trying to make as much money for himself as possible. The more he makes the less you make. Misalignment of interests within a business deal is usually the cause of these kinds of problems. That coupled with the fact that you purchased too high puts you in this tight spot. The only way out is through it. It also may require flying out and getting on the ground and interviewing other contractors to see if you can find someone else to finish it out if you have lost faith in your current GC.

I would say, sell it on once it is done, continue with another deal and roll over your losses. There is not just the loss of money if you held it longer but also staying in a deal that I think you can now recognize that you should have never been in in the first place. This takes time and energy. But I think that is apparent to you now, so in my opinion it is just about cutting losses, moving on and not making the same mistakes again. 

Thanks @Andy Sabisch As far as time it is pretty minimal it is more the financial investment. I'll give it a few months to see if it is worth the squeeze and report back. I did have really good luck the last time I did the lead generation so I am hoping I can repeat and scale that to more deals this time around.