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The Secret Is Out: Buying Homes At Auction Here In Arizona Is A HUGE Opportunity

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Services for Real Estate Pros with Clever Investor

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OKAY...I'm Starting To FREAK Out!  The Secret Is Out And Investors Are Flooding Are Market To Snatch Up Properties Being Sold At The Auction And I Can Barely Keep Up With Demand!

The team at kleverINVESTOR.com has been buying auction properties for 10 months now.  When we started we were buying rentals on the West side of Phoenix, AZ for $20,000!  That is not a typo, we were buying clean, 3 bedroom, 2 bath, 1000+ sq. ft. homes in decent neighborhoods for around $20,000.  Now those same homes are selling at auction in the high 40's low 50's.  The competition for homes purchased at the trustee sale has gone through the roof as more and more investors from all over the country focus in on Arizona.  It's no surprise this is happening seeing how Arizona has had one of the worst housing depressions in the history of the United States.  According to the Arizona State University W.P. Carey School of Business almost 41,000 Phoenix homeowners lost their homes to foreclosure in 2009.  With unemployment at an all time high, and much of the economic base in Arizona tied to the real estate industry, it does not look like recovery is going to happen anytime soon!

It's amazing what is happening here.  Buying a home at the auction used to be scary and reserved for the "sharks" or the "good ole boys".  Back in the day just tracking local foreclosures was a full time job and most of us couldn't move fast enough to take advantage of any good deals...let alone know what to do once we purchased one at auction.

FEAR NOT LITTLE BUDDY...CODY SPERBER IS HERE TO HELP!

I have put together a little list of the things real estate investors need to be aware of if they are going to take advantage of this amazing opportunity and buy houses at auction:

1)  Find A Reputable Company To Work With That Will Help You Bid.  You are not in the business of tracking foreclosures or standing around all day at the courthouse steps waiting to bid.  By finding an honest company to work with you will be provided with the foreclosures happening within the next day or two and which of those are the good deals to focus on. Many homes get postponed or canceled so make sure the company you choose to work with is getting the latest and most up-to-date information.  The reason you want an honest company is because many "bidding services" take multiple bids from their clients on the same properties and create a "mini auction frenzy" which forces you to raise your bids to levels beyond what you should be paying.

I do not provide a bidding service or bid for others...I just buy and wholesale the properties I pick up at auction to those that don't want to do any of the finding, analyzing, and acquiring work.  Give me a call and I will give you my recommendation on who to use here in Arizona if you just want to bid directly.

2)  Get Your Money Right.  In order to bid on a property you must have cash, a private money guy, or a hard money lender that funds deals purchased at Trustee Sale.  Here in AZ you have to put up $10,000 in the form of a cashiers check (made out to the name of your bidder) just to participate in the auction.  If you win, you give the auctioneer your check and they give you a receipt.  By 5:00 the next day you have to pay cash (in the form of a cashiers check made out to the Trustee) and they give you another receipt that shows you have paid-in-full.  The speed in which you need to move is ridiculously fast so get your money set up before hand otherwise you may loose your $10,000.

If you buy a property through me I will set you up with a hard money lender that works with me and is used to funding auction properties!

3)  Tracking Deeds, Changing Locks, And Possible Evictions Oh My.  Now the fun begins.  Having a good "admin" person on your investment team is key to not going insane!  If you just do one or two deals a year, you can probably handle this job yourself.  But if my hunch is correct...once you make a boat load of money flipping or renting the deals you pick up at auction you will want to buy as many as you can as fast as you can.  This will eventually require a part time or full time person.

The first thing you need to worry about is getting and properly recording the Trustees Deed.  When you "won" the bid all you received was a receipt but the Auctioneer asked you how you want the property "vested". This basically means how do you want to take title.  I suggest using an LLC that is set up as an S Corp for tax purposes.  Within a few weeks you should receive the Trustees Deed in the mail.  This is the only copy so don't lose it.  You will need to go down to the county recorders office and record the deed.  This costs around 10 bucks.  Sometimes the deed doesn't come and you will have to call the Trustee (so make sure you have the Trustee's Sale Number handy) and get them to send you another one.

Right after you buy the property you will want to change the locks.  Chances are that right before the auction 10, 20, or even 30 drivers and other investors tried to "preview" the property.  If the property was vacant chances are someone broke in by either kicking in the door or breaking a window.  Now that you are the proud owner you will have to secure the property and change the locks.

If the house is occupied you will have to go talk to the occupants and see if they are tenants or the old owners.  Owners are easier to evict and tenants have certain rights under the "Protecting Tenants At Foreclosure Act".  Make sure you are familiar with the state and federal laws concerning evictions and have a good eviction attorney on call.  My suggestion is to NEVER EVER EVER leave the old homeowner in the property.  I have done this and every time I want to punch myself in the balls for being so stupid.  (I never said I was smart!)

4) Have A Relationship With A Good Title Person.  When you buy a home at trustee sale, you are counting on all the liens to be wiped away so you will end up with "clear title".  This is a little scary because you will be bidding on multiple properties and moving extremely fast.  How do you know if you are bidding on a first lien position or a second lien position?  If you screw up you may end up owning a home with a senior lien, a tax lien, or HUGE HOA dues owed on it.  By having a relationship with your title company you should be able to call and give them the APN# (this is the tax assessors parcel number) so they can look up which lien is foreclosing.  If it is a first, then you should be okay to bid on the property.

5) Check Those Taxes.  Before you bid on a property go to the tax assessors website and plug in the APN# to check what taxes are owed on the home.  Sometimes homeowners in default have not paid their taxes in years so you want to make sure how much is owed so you can adjust your maximum bid accordingly.  Taxes pass through the auction and become your responsibility once you own the home!

6)  Don't Forget Insurance.  Once you own the home you need property insurance to protect your investment.  If you borrowed money from a private or hard money lender they will require it.  Vacancy insurance is cheap, $30-$80 per month depending on the value of the property you purchased.  If the house has a pool or is occupied expect to pay closer to $90 - $120 per month.  I use Jeremy Besse at Farmers Insurance (480-948-2606) and he is great to work with.

So you can see that buying at auction does require some focus and attention to detail so you don't screw up and lose a bunch of money.  If done right, it will provide you with some awesome money making investments that can't be found anywhere else.  I am a full time property wholesaler and fellow investor.  Every day I start my day at 3:00 in the morning and begin analyzing that days foreclosures.  I research 200-400 properties a day and choose the 40-75 I will be bidding on.  We then drive every property and only bid on the ones that we can get inside.  I have a small team that assists with this and together we are kleverINVESTOR.com.  We are extremely aggressive and dedicated to the investors we work with!  If you don't want to spend hours and hours tracking foreclosures, driving properties, or doing the admin work you may want to work with us instead.  We will buy the property with our own cash and slow the process way down.  We handle all of the admin work and can set you up with funding to pay for your deals.  Also we can show you how to buy auction properties with your IRA or even with conventional funding!!!

Give me a call or send me an email at info (at) kleverinvestor.com to go over your investing goals and see if we are a good fit for each other!  I hope this blog posts helps take some of the fear away from investing at the courthouse steps and look forward to doing some deals together!

Cheers,

Cody (AKA Klever Investor)

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Cody Sperber SignatureCody is the founder and CEO of Clever Investor, the industry's premier source of quality real estate investing education. Cody has successfully closed many different types of real estate transactions including wholesale deals, short sales, multi-unit, subject to, lease options and his own proprietary investing strategy, the Reverse Short Sale. As a new investor Cody quickly gained a huge competitive advantage by mastering online lead generation, building one of the most successful real estate investing firms in the Arizona market. His companies have bought and sold hundreds of millions in properties and he has enjoyed several years where he's closed hundreds of real estate transactions. Before real estate Cody served time in the Navy and attended Arizona State. He is now married to his best friend and they have two beautiful children (Hudson and Brynlee).  Cody most recently published the Start Closing Deals course on real estate investors.

 

Tori Toth
Tori Toth, International - Howard Beach, NY
888.667.6643 NYC & Beyond, HSR, SAR, RESA, LIBOR

You know Cody, I live in NYC but I am interested in having a second home in AZ. I love it out there and its a great escape from winter. I am going to look into this more, thanks for the tip. Just one more snowbird heading your way, right?

Aug 14, 2010 06:33 AM
Cody Sperber
Clever Investor - Chandler, AZ
CleverInvestor.com

Tori,

 

If you do make it out this way you should look me up and maybe I could help point you in the right direction of a good deal!

 

Cheers,

 

Cody Sperber

http://www.KleverInvestorProperties.com

Aug 19, 2010 02:10 AM