Someone Is Hogging All The Deals!
Hey everyone. I am a real estate agent who is a mom of 2 babies and I have started to look into forclosure opportunities. I've opened an equity line on my house to get started, I do lots of research and obviously can do comps on the props. The problem is that this one guy is buying EVERY SINGLE forclosure. The rest of us newbies just groan when he shows up at an auction, I have not been to an auction yet that he hasn't been at..I'm at several each week. He sometimes shows up with other people, for assignment or whatever, and sometimes he bids so high I don't know how he turns a profit. I do have the gift of gab (ha ha) so I have spoken to him briefly, he says he buys many properties and sometimes he doesn't make much and sometimes he does. It seems to be about volume for this guy and not equity. I know the value (or lack of) on these properties and I alomst want to say "stop! It's not worth it" during an auction but I do control myself. Any advice on how to get around this guy? Sometimes he seems to outbid everyone almost as if to say "because I can" I would really like to get started but I will not get "bid up". I'm sure some of you pros see yourselves here...some insight please. Sorry so long a post, Julie
Julie, this guy sounds like a complete idiot, and I would not believe a thing he says.
In addition, I have learned from THE most successful investor in MA that the opportunity is not at the auction due to MA laws. You want to be picking these up PREforeclosure, that is where the deals are - not picking up a property at auction, where you do not even know if you will have to evict occupants until AFTER you are committed to it.
There are better niches in MA I believe. Good luck, Dave
There could be a number of reasons he is buying a majority of the properties. I would not take any advise he gives you. He will not let you know how he is making money. He will not tell you his trade secret and might give you bad information to send you down the wrong track.
If you are buying properties at the court house auction you need to do your homework. Remember that any liens on the property do not get erased when you buy the property.
There are many other ways to find good deals.
Try advertising in the paper or put up signs. Just a simple ad
"We Buy Houses
All cash
Close quickly
AS IS
No Repairs necessary
123-456-7899"
Buy the houses before the get to the auction.
Target the houses you are interested and send out mailers to people in pre-foreclosure.
Julie,
I don't think what you are describing is that unusual. If its not one person, its a group of people who buy most of the properties at foreclosure auctions. They can bid higher because as you mentioned volume. They also have access to a lot of cash. Unortunataly there is not a trick to get around this guy, the key is your determination and perseverence. It is always much harder for someone just starting out, but not impossible.
I think one guy hit the nail on the head when he said that this guy "is an idiot"!!! Really, If I were you i would try to stay away from the auctions. Not to say that you can never find a deal there, but you want these lhomes before he can get his dirty little hands on them, then you can laugh all the way to the bank. Feel free to e-mail me cause I may be able to help you. You know what would be real ;funny, if that guy is a member on this website....LOL
[addsig]
and I just have to say once again that I have discussed this issue of buying at auction in MA with a guy who has bought and sold over 800 properties over the past 20 years, this guy knows more about real estate law in MA than most attorneys, quite frankly, and the auction game is not the place to be to make money in this state. Best, Dave
Well Julie, I think the advice you are getting here is good. Don't go head to head with this guy.
Years and years ago there was this abandoned 8 story building in Chicago I really wanted. It was comming up on a sealed bid auction. At the time I was doing a lot of these common-corridor apartment buildings and this one had my name written all over it.
So I worked and worked, really sharpened the old pencil, made an offer that was the absolute top dollar I could afford to pay.
Of course I got out-bid. But I knew the guy who outbid me distantly and I knew his costs of renovation had to be twice mine. So how could he possibly pay this much for the buidling? Where did I go wrong? What did he know that I didn't know? For several weeks I went back over my numbers, finally decided that if the subject ever came up I'd ask Rick about it. It never did and I never figured out how Rick could out-bid me at that auction.
Two years later the building was up for auction again-- As part of Rick's corporate bankruptcy. Seems he'd been over-paying for buildings and couldn't keep up on all the debt. Go figure.
In the end you have to find a system that works for you. That means finding niches that aren't over-crowded with competitors who may be better funded or willing to take a lower rate of return tan you are.
commercialking, you nailed it! That guy's pride in Southeastern MA is going to land him in BK most likely, and since he is there, and you cannot change that, go to where people are not, and work that niche.
Great thread! - Dave
Julie,
You can either play in his sandbox and be frustrated, or you can have others play in your sandbox. I prefer to make the rules. I don't buy on the courthouse steps. It is tough to get a good deal there. At a minimum you are competing with with first and sometimes junior mortgagees, who will bid up the price, then sell for less as REOs. At worst, you are competing with some idiot who has no clue what he should be paying.
I work to keep real estate from reaching the courthouse. As a result, I play on my terms. If you like foreclosure opportunities, you should be working short sales, and discounted notes with pre-foreclosures. Make them play in your sandbox where you make the rules. At least some of the rules anyway.
perhaps he has a retail buyer lined up...perhaps he owns the mortgage that he picked up at a discount. even though at certain times he makes no money on a house he keeps his construction crew working until the project where he can make real money. or he is just happy making 5-10 cents on the dollar...he figures its better than the interest rate the bank pays . he may not necessarily be the "idiot" as some have labeled him.[ Edited by lp1 on Date 09/07/2004 ]
lp1 has it.
Just because someone else is able to work a deal diferently than you dont think they are an idiot. One of the major courthouse guys in my area buys houses and sells them lease option. he pays cash and usually outbids everyone. he pays cash has several crews constantly working and probably makes more $ on the deal than borrowed money doing a quick assingment or cash out rehab. RE appreciates an average of 7% in my area, therefore if you hold a property 2 years in a L/O in theory you will make 14% on your money even if you bought it at retail not including the monthly income and any option deposits kept from people not exercising their option. If you are also a Mortgage Broker, own a title co., or another related business you will benefit in a variety of ways.
Niche is the key word mentioned earlier. Travel the road least traveled, yada yada yada just do something positive.
Thanks to everyone who took the time to reply...I have tried to get preforclosures by contacting owners..so far no go. In my area we only need 5k cash to bid and 30 days for balance due and the auctions take place at the property. I know this is different from many places and it is not uncommon to see 20 or more people at an auction. Some are pros some aren't! I guess I can only hope that this deal hogger self destructs or gets his fill soon...I will continue to hunt for preforclosures but there is a lot of competition in this area right now..Thanks again everyone keep up the good work! Julie
There are a multitude of ways for those guys to make money. Yes they have a huge bankroll of investors behind them. Yes they sell to other investors that will take a slimmer profit. Yes they have investment groups that will buy at market value because they need the tax write-offs.
You could make it tough for him if you bid high enough on every property, but I think you probably have better things to spend your time on. The guy in our town that does that even offers a monthly seminar to teach you how do it to too. $4k for the seminar and you still won't out bid him, Pretty slick, eh?
Think about it, if you can find the deals before they get to the sale, don't you think it would be natural for him to buy them from you too? He may get an even better deal from you than at auction.....
commercialking,
You left me hangin'! Did your story have a happy ending? Did you end up with your eight story the 2nd time around or did the guy owe so much from the first time that it was still more than you would pay?
Larry