How to buy a real estate deal at a real estate auction
maria gudelis | June 26, 2008
It amazed me the other day while I attended a real estate conference by Bill Gatten and Bruce Norris that a lot of folks did know the procedure in how to buy real estate at an auction that are put on my REDC – Real Estate Disposition Corporation and many other similar companies. You know the ones I’m talking about – they advertise huge full page ads in the newspapers with starting bids of home at something like 1/4 of the value of the home.
OK, so the first thing you need to do is simply call them to find out their purchase procedures. Yes – it really is that easy! Just tell them you are a real estate investor and you are interested in buying a property at their upcoming auction.
Here is how it worked at a recent auction I phoned about – they simply wanted a cashiers check for $5,000 initially for you to bid, and say if the winning bid was $200,000, then they wanted 5% within 24 hours – meaning I would have to bring in another 5% for a total of $10,000. Then they wanted you to close in 30 days. So you would need to either get a loan or use cash (private hard money lending for instance) within the 30 days to buy.
Sound pretty simple right? Well here is something else Bruce Norris said at the Bill Gatten / Norris conference – can you believe that the lenders are the ones that don’t have their ducks in a row and the closing sometimes goes way over the 30 days as they don’t have all the paperwork ready for you to close! Fancy that – a lender being swamped with paperwork! I’m just joking – we all know their is a mountain of paperwork lenders are facing in today’s foreclosure environment but just wanted to give you a heads up that you may have more time than 30 days to close and what that means, more time to find your retail buyer to flip that house to!
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Carnival of Investing – July 29, 2008 Edition…
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What Ms. Gudelis fails to mention is that at several of these auctions especially it seems, at REDC auctions the high price is not the winning price. That is to say that there is often an undisclosed “reserve” price, and that other problems have existed with auctioneers likeREDC. For instance the lender has already sold the property you bid on, or that it seems that they can still sell the property up until the time they accept your offer, so it’s a lot more than just a matter of “paperwork”.