Any Real estate folks buy at auctions???

UTfball68

UTfball68

Well-Known Member
Joined
Jul 18, 2008
Location
Granite Quarry
Recently had a property come up for auction...107 acres, 3 business store front, a barn and 3 houses. I'm interested in the property as a building block to launch another business. The store fronts and houses are on an extremely busy hwy (2 lane anyway), sandwiched between two pretty nice neighborhoods and a middle school on another side. In auction format, I'm pretty comfortable in my assessment of where the acreage and commercial property will be valued. What I don't know is how to value the houses, the neighborhoods on either side are between $110-$150 sq/ft...but significantly nicer and newer and in a neighborhood and not a busy highway, and I'm assuming houses are still going for cheaper in an auction than an outright sale. Best details I can really give on the houses, all 3 were built between 1949-1967...and they look like it on the inside, houses have never been renovated. They range from 1600-2200 sq/ft. Is there a ballpark figure I can abide by, given that info, to add to my figure on the other pieces I'm comfortable with??? I'm hoping you guys say $50sq/ft is a good number.
 
Something that old and dated would need a full renovation to be even close to move in ready prices. At auction I’d expect them to really carry a value of around $30/ft but it’s hard to say without knowing more.

I’ve bought some properties during the upset period and the homes needed full renovation and were around $20-30/ft but didn’t have land or retail attached to it.
 
I'd take another look at the auction docs. The commercial property isn't included.
 
braxton357 said:
Auction as in foreclosure at the courthouse or as in an auction company is going to have a sale sometime soon?
Click to expand...

Auction company is having a sale.

rockcity said:
Something that old and dated would need a full renovation to be even close to move in ready prices. At auction I’d expect them to really carry a value of around $30/ft but it’s hard to say without knowing more.

I’ve bought some properties during the upset period and the homes needed full renovation and were around $20-30/ft but didn’t have land or retail attached to it.
Click to expand...

As Shawn brought to the surface, there are actually two auctions at play here, one for the houses and acreage, another for the retail space. For my purposes, one is useless without the other. What I don’t want to have happen is a $1-200k surprise with the houses. It’s roughly 5600 total sq/ft between the three houses, and I figure if that stays around $300k for that piece of the puzzle, I can end up where I want to be overall. Ultimately, the houses aren’t trashed, I’ve actually lived in worse...they’re just a time warp of interior design.
 
UTfball68 said:
Auction company is having a sale.



As Shawn brought to the surface, there are actually two auctions at play here, one for the houses and acreage, another for the retail space. For my purposes, one is useless without the other. What I don’t want to have happen is a $1-200k surprise with the houses. It’s roughly 5600 total sq/ft between the three houses, and I figure if that stays around $300k for that piece of the puzzle, I can end up where I want to be overall. Ultimately, the houses aren’t trashed, I’ve actually lived in worse...they’re just a time warp of interior design.
Click to expand...

It’s really difficult to value the houses of that age without a decent inspection of their condition.

You could potentially spend $20k to have them ready to rent, or spend $150k to have them market ready to sell and compete with newer move in ready stuff.

Can’t understate the risk of sight unseen from that age/period.

Could need asbestos abatement, entire new floor system, new hvac/ductwork, whole house insulation etc etc etc, before you even get into updating.

A lot of potential for big price projects which may result in just using an excavator to demolish/remove them rather than spend 3-5x $$$ to renovate/update.

I offered $10-$20 /sq ft on a couple houses bc they needed $100k+ in work on late 1980’s houses in a neighborhood that ranges from 200-400k. That was still risky bc there was little margin for ROI when accepting the magnitude of the risk involved. That was with “definitive” prices specific to each property.

Just pointing out, very difficult to give honest valuation including repair sight unseen.

Max, I’d budget $35k each to remove/demolish, and $175k each to repair/update.
 
Mac5005 said:
It’s really difficult to value the houses of that age without a decent inspection of their condition.

You could potentially spend $20k to have them ready to rent, or spend $150k to have them market ready to sell and compete with newer move in ready stuff.

Can’t understate the risk of sight unseen from that age/period.

Could need asbestos abatement, entire new floor system, new hvac/ductwork, whole house insulation etc etc etc, before you even get into updating.

A lot of potential for big price projects which may result in just using an excavator to demolish/remove them rather than spend 3-5x $$$ to renovate/update.

I offered $10-$20 /sq ft on a couple houses bc they needed $100k+ in work on late 1980’s houses in a neighborhood that ranges from 200-400k. That was still risky bc there was little margin for ROI when accepting the magnitude of the risk involved. That was with “definitive” prices specific to each property.

Just pointing out, very difficult to give honest valuation including repair sight unseen.

Max, I’d budget $35k each to remove/demolish, and $175k each to repair/update.
Click to expand...

Thanks for the input. Quite frankly, I'm not even interested in the houses, they just happen to be on the property I want. If I could rent them as is, great...not my forte, but a revenue stream is a revenue stream. Otherwise, I'd subdivide and let them go cheap to someone that does like rental properties. Beyond that, I'd just demo it...doing a lot of building expansions for my day job...had a vacant brick house, similar vintage, got it down and disposed for $7k. Equipment was already there and they were already working, so I understand that was a heavily discounted rate. As noted, one property is no good without the other, but I'm pretty out of my element on auction format residences. I'd rather overpay a couple bucks a sq/ft than lose the property with a conservative price...but I don't want to go in to it thinking $50sq/ft (which is probably my ceiling on this piece of the puzzle) is more than enough and be surprised they hit $75sq/ft.
 
Do you know which property is being auctioned first?
What will you do if you get the commercial lot first at a decent deal, and then the price of the residential balloons out of control?
 
RatLabGuy said:
Do you know which property is being auctioned first?
What will you do if you get the commercial lot first at a decent deal, and then the price of the residential balloons out of control?
Click to expand...

Bingo, that's the risk I'm trying to mitigate. Acreage is done in 12 days, retail front 14 days. So that's a relative fail safe. If the acreage stays a good deal and retail balloons, all isn't lost either. This will be about a 5 year project, so if I have to hold the property for a little while before it sells, no biggie...or, I could just bite the bullet and build a retail front on the property. Way more than you care to know, but I have an acceptable amount of risk I'm willing to take, I have acceptable numbers I'm willing to push to, but the minute that starts to get compromised or I don't feel warm and fuzzy, I'll cut bait to prevent a slow death...there's always a contingency plan.
 
Ive bought a couple auction props just a few random thoughts

1- Most are title independent. You have to do your own title work prior to bid. Meaning if you bid and then find out there is another undisclosed lien on the property your are responsible for it or lose the property. Clouded titles and things like this make future sales tough. This throws a lot of folks off because unlike any oher transaction in business real estate can totally screw you, take your money and give you nothing and you have no recourse...other than possibly filing for a lien position yourself against a new rightful owner. You are a smart dude and proably wont miss this but I know a guy personally who got bankrupted becasue of this. Caveat Emptor.
2- Dont forget about auction fees independent of closing costs. Some of the online houses are north of 10%
3- Make sure you understand the close terms. The sole reason I bought a few auction props is they were fixed close. Meaning 30 days after auction you had to close, no extension, whether or not financing is approved. This scares off timid and low NW investors...in this case you can get a deal sometimes just by buying in cash and immediately obtaining a traditional mortgage. But you have to be able to close and float the gap.
4- IME auction props in the carolinas are useless right now. The entire area is on a hot list for Berkshire Hathaway Real Estate. They are corporate bidding sight unseen and are overpaying. Its a complex scheme or forced appreciation through comp manipulation but somehow its legal...
 
^^^Spectacular points, and yes...#4 I've already been beat like a red headed step child a couple times, can't compete unless you have the resources to wait it out.
 
UTfball68 said:
^^^Spectacular points, and yes...#4 I've already been beat like a red headed step child a couple times, can't compete unless you have the resources to wait it out.
Click to expand...

I dont know if its just that they lack local street level awareness or if it is more nefarious than that.

In the town I grew up in there is the "bad part of town"...all the houses over there are 1000-1,300 sqft and typically sell for ~$35-45k.
That same house across town sells for $90-110k.

Ive watched them buy these wrong side of track houses with an open auction bid of $65k. No one local even bids they just snicker. Then they get the $5k lipstick on a pig treatment and get relisted at $85-90k.
5 years ago when they started it was hahaha because no bank would lend because all the comps were in the 30s....now they all comp, to other BH auction buys and if they can get financing approved they sell.

On one hand - capitalism at work. On the other they are preying on under educated poor folks and worse they are preying on the most upwardly mobile motivated of the under educated low income group. Leading long term to cynicism and disenfranchisement I fear.

Ive spent too long thinking on this and I really am starting to think its pretty dark.
 
Ron said:
4- IME auction props in the carolinas are useless right now. The entire area is on a hot list for Berkshire Hathaway Real Estate. They are corporate bidding sight unseen and are overpaying. Its a complex scheme or forced appreciation through comp manipulation but somehow its legal...
Click to expand...

So follow up here. Ended up not getting either (probably). 107 acres went for $75k more than I was comfortable with in the last 2-3 hours of bidding. Not really that out of line, someone just wanted it more than I did. However...I WAS/am in the running for the retail space. Kinda sweating bullets, doesn’t do me any good by itself, but for the price wouldn’t hurt to have. Terms included ‘seller confirmation’...highest bid is rejected, auction extended another 14 days. I get talking to the auction house as a serious buyer to see what would be accepted...’the seller is looking for a Walgreens or Chic-Fil-A type deal’...the price they eluded to is about 2-2.5x my high bid. Can’t blame them though, I’m doing something similar...just demolished a house on a corner lot in an area where Napa/autozone/advance/oreillys have dropped stupid money within a one mile stretch for new stores. In my opinion, god awful area for retail fronts, but somebody somewhere seems to be willing to pay triple tax values.
 
I've not read all of this because im sleep deprived and about 2 sheets in the wind, working on 3 but...

House that old, keep under ~70/75 sq/ft tops. Probably need a decent amount of work and to level em out to a clean lot, you're not out yet with the franchise/commercial stuff you said is going on.

Tax assessment is usually 80% appraisal value, around here anyways.

If someone is thinking about going higher already, and you're doing the work yourself, you can flip it doing the work they don't want to do or pay someone to do.
 
Back
Top