Real Estate Investing - Phoenix Real Estate Auctions

Real estate investing has always required a little bit of foresight and a modicum of due diligence.

The process has, over the past few decades, been made somewhat easier by the knowledge that time heals all real estate wounds

In other words- even bad deals could be fixed by cost of living adjustments and growth.

Land, being a scarce object, would increase in value because you can't make more of it.

Time is the unknown.

How much time does it take for a property to increase in value?

Now- the time factor has a warp to it.

Some properties are not increasing in value.

Some may have seen their zenith in our life time.

This is part of the new investor reality.

In the past year I've changed focus away from tried and true real estate investing rules and now work in different avenues.

One of these areas involves buying homes at foreclosure auctions- this I do in the Phoenix metro area.

Every day there are hundreds of homes with foreclosure dates.

They are auctioned off in small law  or title offices or in front of the courthouse.

A reader announces a few pertinant details such as the trustee sale number, parcel number and opening bid price to a group of investors who either pass or bid.

Some days the bidding is brisk- other days not so much.

On average, one in twenty homes (an ever-changing number) recieved bids.

Many of the properties postpone ... some are cancelled... many are priced higher than the market price.

Investors at these auctions have different needs or strategies.

Some buy and rent the properties.

Others buy and flip.

A few buy for primary residence- they're looking to live in the home or have a buyer who wishes to do so.

I have a few buy-and-rent clients. Their needs are the easiest to satisy. Of the available properties, a greater percentage have enough potential margin to make a profit after satisying holding costs.

The buy and flip properties require more research. Among the items we look for are:

• Is the property occupied? If so- understand the eviction process. I'm not an investor who wants occupied property.
• Be sure the note that is foreclosing is "a first". Many investors have purchsed, unknowingly, 2nd & 3rd mortagages.
• Are there items missing? (appliances, electrical wiriing, heating/cooling units, pool pumps, etc.)
• What will be the predicted fix-up price?
• Are there other pending foreclosures nearby?
• What are the current listing prices?
• How fast (or slow) are homes selling?
• Does the home back up to commercial or busy streets?
• Are there high tension power lines?

The list is longer but you get the point... the bottom line is this: are there issues that would inhibit the ability to buy the property and to sell at a profit?

Though there are thousands of homes that go to foreclosure every week in the Phoenix metro area, there are fewer than 50 a day that actually sell at the courthouse. (Current month numbers... previous months have been slightly higher or lower).

The homes that aren't purchased become real-estate-owned propeties- commonly referred as "bank owned" homes.

If you'd like to become a real estate investor who buys at auction, here are a few requirements for the Phoenix market.

• Have the patience to realize that most of the properties you would like to bid on will become unavailable by postponement or being priced beyond a profitability point.
  
• Have a $10k cashiers check. This is to be used as a down payment on the property that is purchased at auction.
• Have the ability to produce the remaining funds by next business day.
• Be prepared to make improvements to the property.
• Allow for time in case the buyers do not have cash or a loan without "seasoning". (90 days for title change)
  

I hope to cover some of these details in greater depths in future blog posts.

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Chuck Willman is a real estate agent specializing in investment property in the Phoenix metro area. He can be reached at these two email addresses: chuck@AZvest.com and chuck@springboardproperties.com .