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We are looking for an opportunity of purchasing a home that is in need of repair. We, of course, want a very good deal on such a piece of property. When we looked houses on the MLS, however, we found that the houses are not appropriately priced for the amount of work they needed. What we are seeing, for example, is a $100,000 house that needs $30,000 worth of work priced at $70,000. If that's the case, I'd rather buy a home for $100,000 and not do any work (the actual numbers are actually higher). When I asked my RE agent about this, she said that this is the only way that some people can get into these homes, so they take them with all their problems.
So we've been looking into auctions. We are not ready, financially, for a purchase in this manner (fanciable auction homes are rare and, to be honest, I'm sick of banks and their shenanigans), but thought we could have enough money by this winter. This may not be a good way for us to go, but I don't want to rule it out either.
A situation that we would like would be to find a piece of property that is almost a tear down. A place that we can park an RV while we work on getting the house livable. Some of the work we can do and some would need to be contracted out. The primary place where we've been looking is at auction.com. Most of the houses on that site are relatively newer homes and have a, what I think is, high starting bid given the fact that there is no way to do any real inspection and almost always have people living in them that would have to be evicted. They could do who-knows-what kind of damage in the process of being pissed off over the eviction and losing their home. As far as I can tell, the only due diligence that you can do is a title search.
I'm not sure if it's allowed, but I want to go down as a spectator and just watch the process. Most of them seem to go on in a room at the county courthouse. My understanding is that to register you have to put up a significant fee ($5000?). Is that refunded to you if you do not bid on or win the bid? Payment, in full, is due that day for any winning bids, right?
Can anyone offer any insight? I'm really in the dark here. Is there a better way for us to achieve what we want?
An example of the information provided is, "Est. Debt $135,000 and Starting Bid $70,000" on the auction site. Does that mean you have to make up the difference? A cursory look at the properties online doesn't really get me excited. I know that people do this and flip them, but the really good auction deals don't seem to be a reality from my very limited knowledge on the subject.
I do not wish to burst your bubble, but I think you are being overly optimistic about your ability to get a home at a huge discount. There are different types of auctions. Auctions like auction.com and Hubzu that sell every type of property from normal sales to foreclosures and there are trustee/sheriff sales which are held at courthouses or at trustee offices. Most auction sites have significant fees associated with bidding (read the fine print), many have reserve prices that limit how low you can bid. County sales (trustee/sheriiff) are absolute, but almost always require cash.
As for getting a fixer-upper, of course they are out there, but the good ones are snapped up by professionals that have cash and construction crews that repair and flipped them quickly.
Your best chance is to find a home that is livable but in need of some repair and use your "sweat equity" to update it and save money. Let's use the example you gave of the $70K house with need of $30K repair. You could have bid $60K for the house and did some of the repairs yourself (let's say $25K). Then you would have a $100K home for $85K. Not a bad deal.
Finally, the likelihood that you will have a city or town allow you to live in a mobile while you fix the main house is nil, unless you are really out in a very rural area where no one cares.
but I think you are being overly optimistic about your ability to get a home at a huge discount. There are different types of auctions. Auctions like auction.com and Hubzu that sell every type of property from normal sales to foreclosures and there are trustee/sheriff sales which are held at courthouses or at trustee offices. Most auction sites have significant fees associated with bidding (read the fine print),
Have you done this before? Are there "industry" standardized fees?
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many have reserve prices that limit how low you can bid. County sales (trustee/sheriiff) are absolute, but almost always require cash.
Yes, I have seen this.
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As for getting a fixer-upper, of course they are out there, but the good ones are snapped up by professionals that have cash and construction crews that repair and flipped them quickly.
Well, if they can do it, I can do it, right? My cash is as good as their cash, isn't it? Do they have a lower overhead somehow? I would think that with a more flexible time frame and the ability to get a variety of bids along with other cost-saving abilities, I would be at an advantage? Not only that, but the flipper wants to make a huge profit. Unless it's a putting-lipstick-on-a-pig crew, each sub contractor has an owner who wants to make a profit on their worker's labor. (I know the lipstick/pig flips are out there...we just walked away from one during the contingency period.)
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Your best chance is to find a home that is livable but in need of some repair and use your "sweat equity" to update it and save money. Let's use the example you gave of the $70K house with need of $30K repair. You could have bid $60K for the house and did some of the repairs yourself (let's say $25K). Then you would have a $100K home for $85K. Not a bad deal.
We were planning on doing some sweat equity. My husband is a pretty handy guy, but some things - for example, a roof job - would need to be sub contracted out. The problem is, we can't say for sure what needs to be done because there is no way to accurately judge how much work will need to be done and the properties are not priced inline with this much risk. I figured I must be overlooking something. Maybe not?
We are not even averse to taking it down to the studs but it would have to be priced accordingly.
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Finally, the likelihood that you will have a city or town allow you to live in a mobile while you fix the main house is nil, unless you are really out in a very rural area where no one cares.
Unless you live in an HOA that bans it, anyone can park an RV on their property. I'm pretty sure there is no ordinance against living in one while you rehab the house that sits on the same property, but I'll check.
I do not wish to burst your bubble, but I think you are being overly optimistic about your ability to get a home at a huge discount.
Exactly my thoughts. If this were such a good deal investors would pile on it until there is so much demand that it would no longer be a good deal.
It is a market for seasoned experts. OP f you were one you wouldn't ask. Since you did ask, my advice is to go gain some experience and get into this market after you have gained that.
Unless you live in an HOA that bans it, anyone can park an RV on their property. I'm pretty sure there is no ordinance against living in one while you rehab the house that sits on the same property, but I'll check.
Don't bet on it. Find out for sure. In our town RVs can only be parked in residential areas if they are screened from view. It is also prohibited that RVs parked in residential areas be used as living space.
You can go watch an auction without bringing money. Auction.com you register on line and check in when you get there.
Of 26 homes on the auction list, 8 sold for well above the starting bid, 4 didn't meet the reserve so went back to the bank, and the rest were postponed.
Most banks will sell for less than the estimated debt, but they don't disclose the reserve amount until the bidders are really close to the amount but not quite there.
There is a 5% buyers premium that you pay in addition to the winning bid at auction.com
Since you did ask, my advice is to go gain some experience and get into this market after you have gained that.
I have planned on attending auctions and seeing if some of the bidders would be willing to talk to me. Is there a more efficient way to go about it? You sound like you have experience with this. What would be your advice about gaining experience?
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Originally Posted by MidValleyDad
Don't bet on it. Find out for sure. In our town RVs can only be parked in residential areas if they are screened from view. It is also prohibited that RVs parked in residential areas be used as living space.
As I said earlier, I'll check on it. I'm in a low regulatory state, so I would bet on it. Regardless, if I had to screen from view, then that's what I'll do. In the long list of things I'm concerned about with this process, this is the least of my worries. I can live where I am as long as need be. I was talking about an ideal circumstance, which I know ideal isn't necessarily what you get. By coming to this site, I was hoping to get as much information as possible.
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Originally Posted by NinaN
You can go watch an auction without bringing money. Auction.com you register on line and check in when you get there.
Of 26 homes on the auction list, 8 sold for well above the starting bid, 4 didn't meet the reserve so went back to the bank, and the rest were postponed.
What do they do with the ones that don't meet the reserve?
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Most banks will sell for less than the estimated debt, but they don't disclose the reserve amount until the bidders are really close to the amount but not quite there.
There is a 5% buyers premium that you pay in addition to the winning bid at auction.com
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Originally Posted by NinaN
Forgot to mention that the sale is As Is, even the title so buyer needs to research the title and liens agains property before the auction.
All very good information, NinaN, and exactly what I am looking for. Thank you.
The ones that don't meet reserve go back to the bank and eventually show up as a listing on mls. No, the bank won't work directly with you.
Forgot to mention, some of the houses are still occupied and you inherit the tenant if it is.
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