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April 9, 2009
Housing Auction
I have been looking to buy a multi-family home for approximately a year. I stumbled across a property in a great area that was foreclosed and is up for auction. I am very hesitant to purchase a property without inspecting the interior. Has anyone brought a home at an auction? And have any advice for me?
Comments
Well one thing I do know for sure is that if you can buy it at auction prices then you are very lucky! You usually find real estate agents and other parisites who use these auctions as a place to make a quick buck. They don't like real home buyers there.
Posted by: hannible at April 9, 2009 9:29 PM
I bought a house at auction at 27 but was able to "break into" into it through an unlocked door before the auction to see it prior to bidding. This was in the aftermath of the last major RE bust in the days of the Resolution Trust Corporation.
If you know the place was habitable (not a derelict shell), are not relying on conventional financing, know you can handle a worst-case scenario both financially and renovation experience-wise, and know the market, I think it is worth considering, even if you do not have access to in property.
The "pros" do it all the time.
But this is not a gamble worth taking if you don't know what you are doing. Many first-time buyers in the RTC auction days got in way over their heads, buying properties off of Polaroids, not realizing that the interior had been gutted (no heating system, no stairs, no bathrooms....).
Do as much research on the property as you can and be careful. If you take part in the auction, set a limit first and don't let emotion carry you away. Better to go back home with your earnest money intact than to lose it because you can't get the financing together or have to walk away because you realize it was a mistake.
Posted by: renomandru at April 9, 2009 9:53 PM
I agree with renomandru.....we went to a city auction for a property in 1987, with our hearts set on a building. The city did allow an inspection, and we showed up along with dozens of contractors. As we got to the top floor, we could see outside through the wall because bricks were missing. Coming back downstairs, we discovered the staircase had collapsed and had to slide along the wall to get down. We still went to the auction with a budget limit in mind. At the auction, the bidding quickly passed our limit, and my then boyfriend kept bidding. I was horrified and kept prodding him to stop. He did stop bidding at double our budget and the winning bidder got the property for $1,000 more. My boyfriend said that he kept bidding because if we couldn't get the building, the other person was going to have to pay dearly for it. Two years later the building collapsed and is now an empty lot. Thank god we were not the successful bidders.... and just remember, you could end up bidding against someone like my boyfriend.
Posted by: Schultz at April 10, 2009 6:11 AM
My huby and I made a very expensive mistake that to this day we are still paying for. We set a budget and did not go over it, we thought we did our homework but to our dismay we didn't.
First advise to you would be make sure the building is not occupied, if it is try and talk to occupant(s) of the home to see what the story is before biding on the property (in our case we didn't do this until after we won the bid only to find out that there was a whole lot going on that we weren't aware of). If the property is occupied you will have to budget for renovation costs and costs of lawyers fee for eviction proceedings.
Another advice would be do a title check to see how many mortgages are on the property (this may cost a few hundred dollars but trust me doing that now might save you much more in the future). In many cases once you win the bid you also "win" the responsibility of paying off all mortgages on the home.
Remember once you turn that bankers check over there is NO TURNING BACK!!
Hope this helps, good luck and I hope your experience will be better than ours!
Posted by: nako at April 10, 2009 10:40 AM
great post thanx
because we have been thinking about this
and i saw this feature on TV of an auction in the city.
where things all looked pretty descent.
Nako you make me curious about your story
which sounds horrible and am sorry to hear that.
Can you tell me what the situation was and how things have turned out?
Posted by: dutchman at April 10, 2009 4:01 PM
It’s funny b/c my husband was supposed to be there with the check but he got caught in traffic (maybe I should have saw that as a sign..lol). We opened a home equity line of credit on our current home and took out the 10% for the down payment.
After I won the bid I was approached by a detective that wanted to know how I knew about the house and if I knew the occupants (second warning). This was my first time winning an auction so I thought maybe this was common procedure. I explained that I saw this home on property shark for auction and that I didn’t know who lived there. This got me thinking so while waiting for my husband I tried asking the bank representative a few questions but he was very standoffish. All he wanted was the check and was upset that I had him waiting.
Once my husband got there we were told that we had 30 days from that day to get a mortgage and close, if not we would lose our 10%. We both had good credit and at that time the economy was doing very well. We knew somebody lived there and thought oh well worse case we might have to evict them but didn’t really worry much about that.
We were so happy and decided to go to “our new home” and introduce ourselves to whoever lived... after that meeting we started thinking what did we get ourselves into.
The owner said she met “somebody” who told her they were going to help her with her mortgage so she signed her deed over to them (not sure of all the details) but it look like that person took out a second mortgage on the home and skip town leaving her responsible for both mortgages. She couldn’t pay them (hence property under foreclosure). She then told us that the matter have been under investigated for months now and if we could we should try to get our money back.
My huby contacted the bank right away and they said did you read the contact no refund of deposit and not their responsiblity we should have did our homework before we bidded on the property. I was pretty upset because when I asked the back representative if there were any outstanding issues or if there were more than one mortgage on the home he refused to answer. At this point we are starting to see our 10% flying away in the breeze so we’re thinking we have to try something.
We contact a few banks but same problem they needed access to the home so they can appraise, (current occupant refused to give them access) without access no appraiser, no appraisal no mortgage. We even went as far as trying to get a hard money loan (interest rate of 12% or higher) but then if things wasn’t bad enough we found out that we were not only responsible for the first mortgage but the second one as well. At this time we are thinking there is no way we can afford to carry the property until we can get current occupants evicted, pay the lawyer fees and fix up the place. Bye Bye Bye 10% :-(
My huby tried calling the bank for months trying to see if we could get back at least some of the money back…until he finally gave up.
This caused a big strain on our marriage (lucky for us at that time we had no children) we were very depressed and upset..not really at each other but at the situation and wished we knew what we knew now.. (Too late). There is a light at the end of the tunnel not this one but another tunnel. We knew we had to do something to try and recoup and at that point we really had nothing to lose. We had some money left in our line of credit so we took some of it and bought another property (fixer upper) thru regular channels (no more auctions). We worked days, nights and weekends and I'm happy to say thank god it’s fully rented and carrying itself with some left over to help pay for our first OPS….
Posted by: nako at April 13, 2009 12:05 PM
Wow Nako...you have TRULY opened my eyes. Glad to hear you and the hubby were able to push through this.
Posted by: Opinionated at April 13, 2009 3:51 PM
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