Your heart is pounding like crazy and beads of sweat are forming on your brow. You can feel the sheer exhilaration in your body but are also overwhelmed with anxiety. Relax! You're at a property auction. Sure, there's a lot riding on you
making the right decision right now - one good purchase could launch you into a whole new financial universe, but the wrong purchase could have you curled up in the fetal position in a dark corner wishing you had never stepped foot into the ring. So why take risk purchasing at a property auction you ask?
Two reasons: timing and pricing. There's simply no quicker way to acquire property and typically you can't get the property cheaper any other way.
Objective Number 1: Find which properties are up for sale
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It's hard to score big at a property auction if you don't know where they are held and what properties are being sold. So what's the best kept secret in the industry? When
a house will be auctioned and what
is required to bid on it. Most foreclosure sales are non-judicial foreclosure sales and require the banks to hire a local attorney, known as a trustee. Trustees are typically required by law to post the notice of sale in a local publication, generally a newspaper or a legal notice circulation. Many times you can contact local trustees for major banks and inquire about their websites and where they post "Notice of Sale" information on properties soon to be put up at auction.Objective Number 2: Researching the Title to the House
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Buying at property auctions is without a doubt the riskiest of all real estate transactions because there is typically no title insurance. In plain English, you don't' really know if what you actually bought what you think you bought. Remember, you are not buying a house, you are buying a legal description on a deed that is hidden deep inside of a trust deed and written in a metes and bounds description; which for most might as well be ancient hieroglyphics. This level of research can be insanely tedious and you can image the pain many professional buyers have looking at several hundred homes in one county in a single day. If you are new to the business then it is paramount that you enlist a local title company to do what is called a "PR" or Preliminary Report and ensure for what we call "clear title".Objective Number 3: Scouting the House
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True professionals sometimes don't have time for this step, although no one new to this business should consider buying a house sight unseen. Take as much time as you can and research the house, the neighborhood, and determine to the best of your ability how much rehab cost and time the house will require. Here is a hint: it's always more than you think.Objective Number 4: Winning the bid
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It is important to understand the mindset of someone who makes a living at property auctions. The money is made in the purchase, not in the sale. This concept is paramount and worth reading again if you have any doubts or misunderstandings. Too many times rookies focus on the sale of their product, or rely on their master weekend warrior skills, thinking this is going to be the key to their success.
The professionals know that your success relies on getting a good purchase, and if you are lucky, having to touch the property as little as possible to flip it for profit. Once an auction starts, take special note as to who is bidding on the property. If you are standing in a small crowd of people at the auction who seem to know the trustee selling the property on a first name basis, and no one else has any interest in the property, then run. Observe what the professionals are bidding on, and if they aren't bidding: Buyer Beware! They know something about the value, condition, or title that you don't. My suggestion, wait for interest in the property from the experts that buy consistently and then bid slowly, by the smallest increments possible. Don't go parading around your excitement or people may run you up just because they never want to see your face again; try to act calm and somewhat disinterested.
Once you are the highest bidder and the trustee affirms "sold", and your money is paid, it is time to break into your new house. That's right! You don't get keys at foreclosure auctions so it is up to you to contrive a way in. As you take in your property for the first time, it produces an intense excitement like betting big in Vegas.Objective Number 5: Getting the house to market
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Do as little to the property as possible, that's the goal. As a professional "flipper", you must remind yourself this is not about your personal taste and you are not going to live there. Keep things simple, cost-effective and neutral. Time is money, so get the property done and on the market ASAP. If you fixed the property right and priced it to sell, you will surely be receiving offers and sitting at the closing table collecting your profits. This form of legalized gambling is an addictive and rewarding career path if you stick to your principles and never bite off more than you can chew.