Foreclosure in New York>Question Details

Clairesmom, Both Buyer and Seller in Chicago Heights, IL

What are the advantages of buying foreclosed properties at trustee auctions vs. buying REOs that sell on MLS?

Asked by Clairesmom, Chicago Heights, IL Mon Feb 18, 2013

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The only advanatge of an auction is less competition as it usually requires cash with no contingincies. the downfall of auctions is you can only use cash, can not place any contingincies and may have to pay back taxes, leins, hoa fees or 2nd mortgages if there is any. Auctions are risky if you do not do your homework.
1 vote Thank Flag Link Mon Feb 18, 2013
If you're going to be flipping/wholesaling houses, REOs may have a stipulation that you can't sell or assign the property within a certain time frame -- sometimes 30 to 90 days. I have yet to come across an auction that places that burden on the buyer.

I"ve also heard of some instances where the banks try to limit the amount you can resell the property for.
2 votes Thank Flag Link Mon Feb 18, 2013
Usually with a foreclosure auction you may not enter the home prior to the sale. You are buying whatever you can see from the street. I've seen foreclosure properties where they really have removed everything from all appliances, kitchen and bathroom fixtures, cabinets and even the boiler including all plumbing. Basically it was a shell. I've seen others that weren't maintained, but were just left the way they were with no intentional damage and not too bad.

When you buy at a foreclosure auction there is an amount the bank is bidding to protect their investment. Frequently you can buy a house for LESS then you would at the auction if you wait until the bank owns it. I bought a house for myself from a bank, paid $7k less than I would have at the auction and got the bank to pay for installation of a new fence around an inground pool and give me $3k credit towards a new boiler. I contacted the bank directly after the sale and as I was a broker, they sent me the keys to inspect the property. The bank was happy someone qualified wanted to purchase the house as they wouldn't have to pay a broker's commission and own the property for longer than they had to. I bought the house for $193k and sold it a few years ago when the market was down for $492k. Yes, they can be good deals if you know what you're looking at. They "can" be a great deal to buy at auction, but it depends on your risk tolerance.

Good luck!

Don Mituzas
Licensed Associate Broker
Douglas Elliman Real Estate
http://www.donmituzas.com
http://www.nyhomeseller.com
0 votes Thank Flag Link Fri Mar 1, 2013
Less people to bid against.
0 votes Thank Flag Link Fri Mar 1, 2013
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