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Residential Real Estate Auction
Old 03-12-2006, 07:59 AM   #1
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Residential Real Estate Auction

DW and I found a flyer in our mailbox the other day ... a home just across our little "lake" is going to be auctioned. Around 2,350sf, built 1987, last sold for $250K in 12/04.

Repo, state of TN, and looks as though (locked, but peering in the windows ...) all the light fixtures are gone, stove gone, minor water leak in one room, etc. It will take a little work, but could be a cheap, bootstrap rental in a nice neighborhood.

We've bought and sold a lot of residential real estate now, including foreclosures, but this will be our first auction. Questions we have are (which we'll also attempt to get answered by the auctioneer):
  • Can we have the property inspected before we bid (auction is 3/18)? DW and I are debating an inspection. I'm serious about buying this place, but leery about committing to $200K+ with little knowledge of the property's condition ... I'd rather drop a few hundred on a professional inspection, than go in with only my own impressions or blind ...
  • I assume their will be zero contingencies ... we win, we own it, no matter what we find out later?

We know our max bid would be $250K from what we're seeing now, there is no reserve, and it will be interesting to see how many folks show up to bid. I'm guessing quite a crowd, and also guessing it gets bid up to $300K or so, and we end up passing. But, should be interesting.

Anyone here gone through a real estate auction before? Any tips?

Thanks.
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Re: Residential Real Estate Auction
Old 03-12-2006, 10:30 AM   #2
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Re: Residential Real Estate Auction

I dont know about your state, but usually here the walk by and maybe a walk through is all you'll get, yes it'll be yours with no recourse, and I wouldnt touch a property thats been scavenged and appears to have some readily visible problems unless I had considerable contracting/repair experience...unless its a very special property at a very special price.

But dont listen to me. I only did one auction in my life, in 1996. 2300 square foot house on a quarter acre in decent shape except for some termite damage to the garage and a very old swimming pool that was going to need a full rehab. I got squirrelly when the bidding jumped from 325 to 400 and it was down to me and one other guy, but the sellers agent told me if I went to 410 that would be it and I'd own it. I chickened out.

Oh yeah, this was in Saratoga CA. Everyone in the bay area reading this just said "holy crap". That house is probably worth well north of a million bucks right now.

In that case, I could have knocked the house down and rebuilt it and still be on top. Special house, special price.
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Re: Residential Real Estate Auction
Old 03-12-2006, 11:57 AM   #3
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Re: Residential Real Estate Auction

Charles, if you cannot get a walk-through (auctioneer would know), you might want to bid anyway. Why? Nobody else will get to look at it either, so it will scare away a lot of buyers. Just make sure that you bid with the assumption that you are going to have to plunk down some major bucks to get the place up to speed.
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Re: Residential Real Estate Auction
Old 03-12-2006, 12:53 PM   #4
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Re: Residential Real Estate Auction

Quote:

Can we have the property inspected before we bid (auction is 3/18)?* DW and I are debating an inspection.* I'm serious about buying this place, but leery about committing to $200K+ with little knowledge of the property's condition ... I'd rather drop a few hundred on a professional inspection, than go in with only my own impressions or blind ...

I assume their will be zero contingencies ... we win, we own it, no matter what we find out later?
Of the half dozen properties I purchased at auction the only ones I could get into before the auction were unlocked (did you check the windows?* ).* Don't expected the state or bank to cator to a single bidder.* Any inspection period would be publicized to keep the playing field level.* But that's ok, because we bid these things expecting everything you can't see has to be replaced. That's the FUN part!

Yes the sale is "as is" ... no contingencies. Cash due in 30 days.

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Re: Residential Real Estate Auction
Old 03-12-2006, 02:10 PM   #5
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Re: Residential Real Estate Auction

We've discovered the garage is unlocked ...
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Re: Residential Real Estate Auction
Old 03-13-2006, 08:33 AM   #6
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Re: Residential Real Estate Auction

I have sold various properties at auction in my practice. I always had a time set where people could view the property. I would publish the time in the newspaper and in advertising for the sale.
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Re: Residential Real Estate Auction
Old 03-13-2006, 12:49 PM   #7
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Re: Residential Real Estate Auction

Quote:
Originally Posted by Charles
We've discovered the garage is unlocked ...
And what'd you find out upon investigating?

What is the FMV of this home in good condition?

Are you handy? Have contracting connections?

Just curious.
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Re: Residential Real Estate Auction
Old 03-13-2006, 04:14 PM   #8
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Re: Residential Real Estate Auction

I've been looking at the county real esate foreclosures too. Haven't actually bid yet. (Coward).

I think I'd be more worried about liens and back taxes or other financial obligations that came with it than the physical condition of the property.

Check zoning and make sure that there are not limitations to the renovation/addition you would be allowed to do (limits on septic size, water moratoriums, critical areas, all stuff we have to deal with here) being on a lake triggers a lot of environmental stuff in our area.

Just my quick thoughts. Let us know how it goes!
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Re: Residential Real Estate Auction
Old 03-13-2006, 05:02 PM   #9
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Re: Residential Real Estate Auction

You should follow up on Sheryl's concern about whether the sale is free and clear of liens.

I used to foreclose mortgages. When you foreclose properly you wipe out junior liens, but not senior liens or property taxes. I had someone buy at a foreclosure sale where there was a big property tax bill. Boy they were mad at me when they found out later on that they had to pay all those taxes.

When I sold properties in bankruptcy cases I would get a court order so I could sell free of liens.
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Re: Residential Real Estate Auction
Old 03-15-2006, 06:50 AM   #10
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Re: Residential Real Estate Auction

Great reminder on the senior liens ... thanks. Worth a quick seach.

thefed, we believe FMV is roughly $200K, considering likely repairs. We're reasonably handy (light fixtures are cake), but time is an issue ... fortunately we now have a good handyman contact ... we'll likely get his help to fix up.

We got into the garage, but no further ... kitchen door locked. But we did find one supporting post in the garage (supporting the ceiling / second floor) is loose, with roughly 1/8" gap to the floor. The second floor didn't likely rise, so ... the concrete floor may have subsided. Now, the house two doors away apparently had the front porch collapse in the past year due to subsidence ... explained by a neighbor as "that's where the contractors dump the construction debris, and they didn't compact before building the masonry porch". We'll be looking very carefully for other evidence of foundation issues. Otherwise, still looks interesting.

Thanks again for the suggestions.
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