Many people hear about the great bargains available in the online USA foreclosure auctions. There is some truth to that, although there is certainly nothing easy about getting them. I think the best way to describe it is to write about my own experiences securing foreclosure properties through the Pinellas County auctions in Tampa Florida.
Pinellas County auctions are online and anybody can create an account, place a deposit and bid for any of the 170-200 properties that are auctioned every single week.
Every Monday morning I scroll through a list of 170+ properties due for auction the following week. I would select a shortlist of 40 that matched our zipcode and price criteria. As the information contained in the Pinellas auction records is quite limited, I would then use websites like the MLS and Zillow to filter the specific property types, square footages and building ages that my partners and I were interested in securing.
That usually left a list of 10 properties every week. We would then drive by each of them and do further research on what the market value might be. We had no access to the insides of any of these properties so we had no idea what the floors, walls, kitchens and bathrooms were like or the condition of the plumbing, heating and electrical systems. That meant we needed very conservative renovation estimates. Once we plugged these numbers into our carefully constructed templates we had usually whittled that list of 10 properties down to 3 or 4 properties.
The next step was to research the public records, as these properties could be auctioned with a wide variety of liens attached. That includes anything from a second mortgage, to tax liens, utility liens, code violations and even alimony liens. For example we might find a lien for $15,000 attached to the property and so we would adjust our bid price by $15,000 as this would have to be settled.
On the morning of the auction, we would login to the Pinellas County foreclosure site and review our shortlisted properties. Usually half of them would have been withdrawn the previous evening due to a court order filed either by the person being foreclosed on or the Plaintiff (the bank). Plaintiffs always have a maximum bid that they are prepared to pay but you have no way of knowing in advance what it is. You just have to hope that your maximum bid price is higher than theirs.
To the frustration of wholesalers everywhere, the majority of properties at auction are either purchased back by the Plaintiffs/Banks or cancelled at the last minute. To give one example: on Monday 20th April, there were 72 properties publicly listed for auction in Pinellas County. By the close of business, 37 of them were bought back by the Plaintiff (i.e. they outbid everybody else, often at prices that made no sense), 19 were “Cancelled by County or Order” and 16 were successfully purchased by third party bidders.
Think about that: just 16 of those 72 properties were actually available to purchase at a price that was low enough to interest a third party and high enough to satisfy the banks. Some of the prices third party bidders paid made no sense either: I remember properties I valued at $120,000 being bought for $170,000. Bear in mind that the winning bidder would have had no idea what condition the property was in, they had no inspection period and they had an obligation to pay the full purchase price, in cash, within 24 hours of their bid being accepted. A suspiciously high winning bid is often a sign that an amateur investor bought it without doing a title check.
As you have probably gathered, this method of purchasing property is strictly for knowledgable professionals who are on the ground.