Real estate, at least in Florida, has returned to being a hot market. Everyone wants to get in and it shows through Real Estate ‘Auction’ sites like Auction.com and Hubzu.com. Previously, these sites would simply work with the banks and “auction off” their REO inventory, but now everywhere you go, you’ll see these $100 minimum bid auctions being advertised on these sites and others like Zillow, Trulia, and Realtor.com.
Hey, I want a $100 property, how do I get in on this advertised action?
The REO and foreclosure industry is large and complicated, with many ways to profit and many ways to get burned. I won’t go into all the ins and outs of the industry and how to profit, but I would like to touch on these $100 auctions. County auctions are where the actual foreclosure auction of a property takes place. Yes, every county in every state has these auctions on a daily basis. Each county has its own set of rules about the days and times they auction properties, as well as whether they hold their auctions online or in person. Any county you would like to participate in will have those rules set up generally on the Clerk of Court website.
So, what are the steps I need to follow to be able to bid?
If the county you wish to participate in hosts its auctions online, you will need to create an account in that county before you can bid. Once your account is created you will need to fund it, percentages vary but let’s say your county requires a deposit of 5% of the offer price. So what that means is that you have to put 5% of your maximum possible bid into this account, otherwise you won’t be allowed to bid. You have decided that you only want to bid on properties that are $50,000 or less. You will need to add $2500 to your account. If the county you’d like to bid in has in-person auctions, you’d better come with a pocket (or briefcase) full of cash, it will be delivered at auction close.
OK, I’m done, on my first auction.
In online auctions, there are two ways to bid: you can set a maximum bid and let the software increase your bid as it is outbid, or you can view the auction in real time and bid manually. So, you’ve done your research and found the home you’d like to bid on… Did you receive a title report prior to the auction? Wow, more on that in a later post.
Today 30 houses are up for auction, your property is #17. So you wait, and you wait, and property #11, two people are manually bidding against each other and waiting until the last second to place their bids, so this property that should take about 5 minutes is taking 20 minutes. What these two don’t realize is that you can’t make a sniper bid at these county auctions, it resets the clock. So you look at them for another 5 minutes and someone finally concedes.
OK, here we are at Property #17. There are too many scenarios to talk about, so we’ll go through a few assuming you’re bidding manually.
- Same scenario as #3, but this time you win the auction for $47,500. Congratulations, but you’re not done yet. Your dream property has no maximum plaintiff offer, is valued at $60,000 and has a final judgment of $45,000, great, you can get in on the action. Bidding starts and jumps to $45,100. OK, the plaintiff (most of the time the bank) can’t bid anymore, why don’t you ask, well that will be another post. Time is ticking and you make an offer of $45,800, the offer price rises to $45,500. The clock ticks. The bid price goes up to $45,900, suddenly someone outbid you. You make another offer of $48,000 and the offer price goes up to $47,500, now you are winning. The clock is ticking, it’s almost yours, no, the bid price goes up to $48,100, you’ve been outbid by someone who thinks they can bid you, the clock starts again. This happens for several minutes until the other person exceeds their $50,000 bid limit.
- Dream property says plaintiff has a set maximum offer of $35,000, is valued at $60,000, and has a final judgment of $36,000, great, you can get in on the action. Bidding starts and jumps to $55,000. Shucks, I guess you’ll have to try again.
- Dream Property says the plaintiff has a set maximum offer of $75,000 and the property is valued at $100,000 with a final judgment of $75,000. Wow, I guess I should have seen it before spending all that time and effort, you can only bid up to $50,000 with your deposit.
I won, now what?
You won your auction for $47,500. Most of the time, the auction will send you an email directly after the auction you won with a request for the total you owe (not just the $47,500) but also the fees. If you have $48,000 in your auction account, just log in and pay. If you only have $2,500 in your auction account, it’s time to move. Now you have to go to your bank, get the additional funds so you can take them to the county courthouse, deposit those funds, then go back to your computer, log in, and pay the amounts online. In many counties, you only have until the end of the day (4 pm) to pay the funds. Otherwise, you will be banned and the property will be re-auctioned. Now wait 10 days for the deed and proof of purchase. That is if you didn’t just buy a subordinate link.
I lost, now what?
So you’ve lost your auction. Unless you want to outdo everyone and money is not an issue, get used to it. There are many competitors in these auctions, including banks, and a lot of money is used. Do your research, stick to your highs, and you’ll get there eventually.
future posts
- doing your research
- Rules for the plaintiff
- Coming In – Securing Your Vacant Earnings, Whoops, Yours Came With Tenants, WOW, Not What I Was Expecting To See.
- Potential Problems With Your Winning Bid – Who Are All These People On The Defendant List? Right of Redemption – Landlord and IRS, Title Reports, Did I Just Earn a Subordinate Lien? HOA and equity lines
- property taxes