The tricky part about auctions is analyzing all of the property values and looking at the properties before hand. The earlier you can get the list of properties to be auctioned the better off you will be. In Texas, you need a local company. The national companies update their systems too slowly for Texas’s 3 week foreclosure process.
Your analysis must be very accurate because the decision to purchase can not be rescinded after the auction. The property analysis should include a search of the comparable sales in the area to determine the property’s resale value. It should also include a search of the county court house records for liens posted to the property. A visit to the property is required to determine the property’s condition. An estimate of repairs must also be made. You can see the problem with doing this type of in-depth analysis on 100’s of properties for sale at the auction.
Most of the properties you will not be able to purchase. Sometimes you can not buy anything. It is the nature of auctions. This time consuming analysis is one of the reasons such incredible bargains are available at tax sales.
As the story goes a man complained to his friend that he had purchased a property at a tax auction that was 3 feet under water. “Did you complain to the auctioneer?” His friend asked. “Yes” the man replied. “And you got your money back?” “No” the man replied, “he offered to sell me a boat.” The moral of the story is always inspect the property before bidding on it because you won’t get a refund from your tax assessor.
Take the time to analysis and look at every property that you intend to bid on. No matter how good the deal seems, never purchase a property that you have not looked at. This will be very difficult at first when you see the bargains that are presented frequently at these auctions. In one foreclosure auction I attended, 2 houses sold for $5,000. Unfortunately we had not looked at the properties, but the tax appraisal was $60,000.
There is such a thing as useless land. It may be too small to build on or in an area where the property values don’t justify building. It could be environmentally contaminated in which case the loss would be much more than the purchase price because the current owner is responsible for the clean up. Do not let this scare you away from auctions, but please exercise caution. After analyzing the properties prepare a maximum bid amount for every property you intend to bid on and write this number next to that properties address. Do not exceed your minimum bid amount. This may seem obvious, but it can be difficult to stand your ground in the heat of intense bidding. It is the excitement of the auction that ruins the investor.
There is a tendency for beginning investors to question their analysis once a property has passed their maximum bid amount and seemingly intelligent people continue to bid the price upward. Trust your analysis. The other buyers may be retail buyers who want to live in the house or they may be amateur investors who have not had the benefit of training. In some cases, the buyers simply have not done any research or analysis on the properties, which they are bidding. Some may believe you can not go wrong with real estate. You can if you pay too much. For whatever reason, many properties sell for more than we are willing to pay in a typical tax auction.
Thank you so much, there aren’t enough posts on this… or at least i cant find them. I am turning into such a blog nut, I just cant get enough and this is such an important topic… i’ll be sure to write something about your site
Thanks 4 A Great Read Foreclosure
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