So after watching all the home flipping shows on TV you think that it is time to purchase some auction properties and retire early. First we must say that it never happens exactly like we see on TV. There are so many variables when it comes to getting a good deal and buying a home below market value.
Auction Properties Good or Bad?
So what we would like to do is just give you a few things to consider before you go ahead and purchase auction properties from any of the online sites. Most times the home will be purchased AS IS and AS IT STANDS. What does that mean to you as a buyer. Well let’s look at a portion of a contract from one of these types of purchases.
BUYER’S INSPECTION.
A. REPRESENTATIONS/WARRANTIES. Buyer represents and warrants to Seller that: (1) prior to the execution of this Agreement Buyer has had adequate time and access to the Property to conduct a complete and thorough inspection of the Property, examine all title matters and other matters concerning the Property and all agreements relating to the Property including but not limited to the disclosures and reports required by any law, rule or ordinance, (2) prior to the execution of this Agreement Buyer has conducted and completed such inspections, or has freely and voluntarily waived the right to conduct any such inspections, (3) Buyer is purchasing the Property based solely upon Buyer’s own inspection and investigation of the Property, (4) prior to the execution of this Agreement
Buyer has satisfied himself/herself/itself in all respects as to the Property and the condition thereof, including, without limitation, the value of the Property, its location, its insurability, its physical condition, its environmental condition, the structural or environmental integrity of any and all improvements on the Property, all title matters concerning the Property, all applicable common interest community, condominium community and unit owner’s or homeowner’s association documents, rules and regulations concerning the Property, and all other matters with respect to the Property, and (5) Buyer is aware of all laws, rules, ordinances and requirements affecting the use,
condition and ownership of the Property, including, without limitation, all applicable zoning and land use regulations and local ordinances. Seller and its agents make no representation or warranty, and Buyer has investigated to Buyer’s satisfaction, regarding whether the location of the Property is in an earthquake fault zone, seismic hazard zone, flood hazard zone, state responsibility area (fire hazard area), very high fire hazard severity zone, or area of potential flooding, or whether the Property is subject to any flood disaster or other insurance requirements or whether the Property contains wetlands or other environmental constraints.
Buyer further understands and acknowledges that the Seller may be selling the Property as LAND ONLY, in its present and existing physical condition. Buyer acknowledges and agrees that prior to entering into the Purchase Agreement, Buyer had the opportunity to conduct his/her/its own due diligence, such due diligence and investigation having included investigations of the entire Property in order to determine its present condition and value since Seller may not be aware of all the defects affecting the Property or other factors that Buyer considered important. Neither Seller nor Seller’s broker makes any representations or warranties regarding suitability to build or inhabit, the value of the Property, lot size, property lines, legal or physical access and boundaries including features of the Property shared in common with adjoining landowners, such as walls, fences, roads and driveways,
whose use or responsibility for maintenance may have an effect on the Property and any encroachments, easements or similar matters that may affect the Property. Fences, hedges, walls and other natural or constructed barriers or markers do not necessarily identify true Property boundaries.
Well now we have seen where the property is occupied and no inspections or eve a walk through can even be done prior to signing the contract. So what would you have to do if the home was occupied. Well in an experience we worked with a buyer who purchased a home this way. We drove out to the house after the closing took place and spoke with the tenants. They were very understanding and were aware that the homes was being sold. They did not know when the closing was actually taking place.
So we with the new owners permission discussed and worked out terms for the current tenants to move out. Sounds pretty easy so far. Well it did not work out that easy, they wound up staying in the house about 40 days past when they agreed to move because they were having troubles finding a new place to live. Now remember our buyer purchased this home without ever seeing inside.
So when we were speaking with the tenants we asked if we could come in and they allowed us in. We found several places where the roof had gaping holes and serious water damage, AC system was literally duct taped together and barely working. One bathroom was unusable. (we’ll just leave it at that) They explained that the previous owner would not fix anything and that they could not keep up with or afford to make the repairs themselves.
We will say that our experience was not a bad one, but there is so much that can go wrong with purchasing a home this way. The buyer fortunately had the funds needed to make the repairs and put a cushion in his budget when mad his decision to move forward. One thing he has told us is that if he could go back and do it again he would not. Because all the estimates he received when he started the renovation were so under what it really cost. He had to hire individual vendors to perform each repair.
We know several investors who have crews, that go from house to house. And this will make sense when we say if You are employing people and need a vendor and say OK, I am going to bring you on and this year we are going to have you work in 10 houses, they are going to more motivated and committed to doing their job, opposed to just coming in for a small job.
In closing we can say that yes, you can make money by purchasing homes this way. You can also lose money and a lot of time dealing with issues that you may not want to deal. Nick & Cindy Davis have experience in purchasing Auction Properties, REO/Bank Owned, Short Sales. We can assist you when the time is right. Remember we are always just a click here or call to 813-300-7116 away.