Access Wealth Strategies

There has been much hype about buying foreclosed properties in mainstream media and on the internet. You may be wondering:

What is it really like bidding at the foreclosure auction? Are there good deals to be had? What does it take to get a good deal?

Last week I interviewed John Ray, owner of a foreclosure auction bidding service firm located in Phoenix, AZ. John has been in real estate for 20 years and is a wealth of knowledge when it comes to bidding on foreclosed properties at the trustee sale auction.

John’s company BidAZForeclosures.com has been bidding at Maricopa county foreclosure auctions on behalf of investors for 7 years, currently buys about 100 properties a month, and is one of the largest bidding groups.

This interview lasted over 30 minutes; it has been captured on video and edited into 4 parts. It is well worth your time to watch all 4 parts because you’ll learn John’s insider perspective on getting a good deal at the foreclosure auction and how to avoid common mistakes investors make.

Topics Covered in Part 1 of This Interview

• Are there good deals at auction?
• How many properties are bought at the auction?

Overview of the foreclosure auction process:

• How do properties end up at foreclosure auction?
• Why do some foreclosures get postponed?
• How does the bank establish the opening bid?
• What is a “total debt” bid vs. a “specified” bid?
• What really happens at the trustee sale?
• What happens after you win a bid?
• How do you get title to the property?
• How do you take posession of the property?

Topics Covered in Part 2 of This Interview

• How does the current market cycle compare to the previous one?
• What’s happening with bank REO properties?
• Why aren’t banks doing more short sales?
• How do you buy properties at auction?
• Why do investors use your bidding service?
• How risky is it?
• What are some common mistakes?
• What due diligence do you do before bidding on a property?
• What happens when you make a mistake?

Topics Covered in Part 3 of This Interview

• Is there any truth to the “old boys network” that controls the auction?
• What is it like bidding at the auction (examples)?
• What is blind bidding?
• What are dropped bids vs. jumped bids?
• Where do you get the property listing info?
• How are you different from other bidding groups (examples)?

Topics Covered in Part 4 (Final Part) of This Interview

• How do new investors get started?
• What is the Jump Start program and how does it work?
• What are some common beginner mistakes and how do you avoid them?
• Do you really have to pay all cash at the auction?  Are there other options?
• What is “hard money” and why do people use it (examples)?
• How does an investor work with a bidding service like yours?
• How do we contact you for more information?

Please let us know what you think of the interview, whether you love it or hate it, by leaving a comment. If you enjoyed this interview, please rate the videos on YouTube as well.  Thank you in advance for your feedback!

If you’d like to see a video of live bidding at the Phoenix (Maricopa County) trustee sale auction, see my prior post:
Phoenix Foreclosure – Video of Live Auction at Trustee Sale

I visited a live trustee sale auction at the courthouse steps in downtown Phoenix where the bank trustees auction off foreclosed properties to the highest bidder.

See the video below for the live action at the trustee sale.

The video gives you a good idea of what goes on at a trustee sale auction. However, it was not as busy and chaotic as it could be. I will probably go back another day to get more “action shots” for you.

Let me know what you think or what else you’d like to see by commenting below.

Watch the video below for my second visit to this upscale Desert Ridge home, as I tour the house and point out the changes made.

After Renovations

Before Renovations

For your reference, the “before” video (just 2 days after the home was purchased at the Phoenix trustee sale auction) below:

Ask yourself this question:

Would YOU buy this home for approximately half of its peak price at the trustee sale?

Related post: Real Estate Investors Turning to Trustee Sales for Bargain Purchases

A couple of weeks ago, our business partners picked up a home in North Scottsdale at the trustee sale auction. Since we live nearby, we took a video of us driving by the house and the neighborhood, which is a very nice gated community.

The house is currently occupied by tenants – that’s why we didn’t go inside – who signed a lease before/while the last owner was going through the foreclosure process.

There are several things to note here:

1. There are some nice neighborhoods where you can pick up homes at the trustee sale, if you do the proper research beforehand and go through the right channels.
2. Tenant occupied homes bought at the trustee sale create more complications for rehabbing and flipping the house.  You could offer “cash for keys” but sometimes it could turn into a lengthy process regardless.
3. Not having a “move-in ready” house decreases the potential buyer pool and we’ll probably have to offer additional incentives (reduced price and/or credit at closing) to get the house sold quickly “as is” (with some minor exterior work).
4. If you’re a tenant looking to rent in areas where foreclosure rates are high, beware of the financial conditions of the owner.  For example, having your security deposit held in a real estate broker’s trust account is better than giving that money directly to the owner, in case they go through foreclosure and you’re forced to leave the property earlier than expected.

Please add your comment below and let me know what you think.

In just the past 2 years, the real estate market has fallen nationally more than during the Great Depression and more than our most esteemed economists predicted.

Many real estate investors are looking to purchase distressed homes for LESS than the current market price. There are two main options, a bank REO or a trustee sale property.

Foreclosed homes (except through bankruptcy or judicial foreclosure) are sold at auction on the courthouse steps in most jurisdictions.

Why are homes sold at the trustee auction?

This is the legal process to transfer title from the delinquent home owner (borrower) to the mortgagee (lender ).  The lender sets the minimum bid and in most cases wins the auction – the foreclosed home then officially becomes part of the bank’s REO portfolio.  However, sometimes an investor can outbid the lender (the bank) and acquire a home at a discount to the current market price.

Why would buying a home at the trustee sale auction make sense for the real estate investor?

If there is a large enough discount between the price bid at auction compared to the current market price (i.e. comparable sales prices on MLS), then the investor can flip the property for a capital gain or in some cases rent it out for cash flow.

Video Tours of Trustee Sale Homes

Watch this video tour of a home purchased at the Phoenix trustee sale auction to see a home before it is fixed up.

In this second video, we tour a different home that is fully fixed up and on the market. Since the home looks better than new and was well priced (at a discount to current market price), it received multiple offers during the first week of listing on MLS.

You might also like…

Jim Kingle’s video More Around Town, for a look at the San Diego trustee auction in live progress.

My previous posts about trustee sales:

• Real Estate Investors Making a Killing at Trustee Sales
• High Flipper Ratio at Trustee Sale
• Bargain Homes for Sale

Please comment below and let us know if you like this post and what information you would like to hear more about.