Buy a repossessed property

I received an email today with questions and concerns about a foreclosure sale. Great questions, so I decided to post both the question and my answer below.

What has been your experience with foreclosures?

I have a question for you, I am not new to real estate investing, but I am new to the foreclosure auction process…
there is a property that is going to be auctioned next month in our court.
I applied for prequalification with a standard bank lender, who will not close until repairs are made after an appraisal.
I have applied with a private lender who will not lend until they know the repairs…


I have to bid without being seen! How can I get financing? I can bid and put up a security deposit, but I can’t pay for repairs, etc.
Also, how can I evict people when I don’t own the house, if I win the bid and can’t assess the repairs until they’re done? How can I get them out if I haven’t closed on financing and I can’t get financing until I can get them out and assess repairs? round and round…

Any advice would be helpful. You basically have to have 6 figure cash to play these auctions…


For every year, every home and every investor I know, buying at foreclosure auction is one of the worst possible ways to buy. There are several reasons, including the ones you mention:

  • You cannot enter the house to assess what needs to be done because the bank is not the owner yet.
  • You have to work with a bank (the worst) and the rules are constantly changing and never in your favor.
  • Don’t buy anything a tenant has if you can help it. When a house is repossessed, the owners are usually furious and want to take it out in the bank, so they often destroy the property. Ultimately, that doesn’t hurt the bank, only the buyer. We bought one where the foreclosed owners had dumped sand down all the drains. There’s no way to know that ahead of time.
  • Nuisance Offer Periods
  • Most foreclosed properties are sold at retail auction.
  • By the time they hit the auction, the good guys are picked
  • There’s a very real reason banks don’t want to lend you to buy these…

So my advice to you is to attend as many local investor meetings as you can to find properties to buy in better ways than these auctions. If a house is decently priced in a decent area, we find that end-use buyers offer it at retail anyway. And, once your bid is approved, there’s a 10-day “nuisance bid” period where anyone else can come in and bid higher.

There is nothing good about foreclosure auctions. How to make them? Whose. It’s much better to let them foreclose and then buy from the listed realtor once you can review it.

What can you add? What has been your experience with bank foreclosures?

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