Financing Auction Buys


#1

So here is our scenario. Our goal, as I have learned from spending some time on the courtroom steps, is unusual, and no one in our area is doing it. Hence the question to anyone who has. The goal is buying and renting about 40 houses, keeping them 2-10 years. There are four of us. (2 married couples) We have enough cash to buy about 7 houses outright. I’ve heard several stories though that banks/investors will not finance purchases from the courthouse steps until 6 months or even a year has passed. That would put a crimp into things as we want to accomplish this in 6-18 months.?
I’ve thought of starting a corporation, buying the houses through the corpoation,? listing the houses with a friend who is a broker, then buying the houses individually through the broker. Any ideas out there? I don’t mind being on the edge but don’t want to do anything that is blatantly illegal.? ?


#2

I don’t buy it.
?
Unfortunately I haven’t financed my own auction purchase since the
credit crunch, so I don’t have recent data, but I never had a problem
putting in place financing on auction purchases immediately after sale.

?
My guess is that the stories you are hearing are around flipping homes you buy at the courthouse for considerably more money, which triggers anti-flip rules with some lenders. But the primary issue there is that the property is being resold for considerably more that it was purchased for, not that it was purchased at auction. Even then I know guys who are getting auction purchases flipped quickly, so while this can be a problem, it isn’t a showstopper.
?
Another possibility is that the stories you are hearing have more to do with their inability to get title insurance - which will be required for a loan. Some title companies haven’t wanted to insure loans on auction purchases given past problems with buyers colluding to illegally buy at auction, and then the title company getting stuck defending the lenders position or having to pay. Policies vary by title company, so go sit down with your title officer (not escrow officer) and find out what their policies are. Chances are they will be able to help you structure the deal such that you can get it done.
?
Beyond those two issues I have NEVER heard of any lender rules specifically excluding auction purchases for a period of time.


#3

Thanks Sean,
??? Because of your webinar, I’ve both paid for your monthly service, and will start buying in a few days, after spending another 2 weeks learning the ropes with the pros on the courthouse steps. They don’t consider me a threat as I’m just buying for rentals, so I’ve been able to make some friends. I don’t think it would be so easy if they considered me a permanent fixture. You are providing a great? and fairly priced service Sean, and I appreciate it. Scott


#4

Hello,
We are a group that has switched from purchasing foreclosures to providing financing for them once they are purchased at auction. If this is something that might be able to help you, please contact me at: daveone@gmail.com.

Thanks,
David