At a recent auction in El Paso, Texas, I noticed several bidders pulling property information from the Internet as the trustees spelled out the addresses. Many of them used Google Street View to view the homes as they were being auctioned off.
More likely than not, this was the first time these eager investors had seen the properties—and they were bidding regardless!
Warning: Things are different from what you see on Google
I understand why one might choose to do so. After all, it takes less than a minute to load street images from Google Maps or Google Earth. Driving to an in-person inspection takes a lot of time, especially for those who buy properties outside their home county.
But I also know that these time-saving shortcuts can be costly.
Connected: How to Buy a Foreclosure: Guide to Finding and Landing a Foreclosure Deal
Looking over the shoulder of a bidder that day, I recognized the house he was looking at via Google Maps; This was a property that my team ran every month for about a year. As you know, the foreclosure process can get delayed for a number of reasons. The auction of this particular house was delayed month after month. Still, we stuck to our process and continue to include it in our rotation of drive-by inspections.
Most months, this house looked more or less the same. However, during our most recent inspection, the house didn’t feel anything special: it was broken,
Here is the house, with an image taken from Google Street View next to another photo taken more recently by a member of our team:
If you – like many of the bidders at that auction in El Paso – rely on old, easily accessible online information as your sole source of property data, you Time to take a big risk. While the above example is a bit extreme, it shows why buying properties unseen at auction is a bad practice.
dig deeper than the competition
Drive-by inspections aren’t just about reducing risk; They are also an essential tool for gaining an edge over the competition at auction.
Unlike the bidders described in the section above, experienced investors usually do due diligence and place their bids at auctions accordingly. However, if you are prepared to dig deeper than most, you will find opportunities that others may have missed.
I had one such opportunity a few years back in North Sacramento.
The property was in a high end area and would be an easy flip if we could get it for the right price. Since the house was not far from where I lived at the time, I decided to do the drive-by inspection myself.
Connected: How To Successfully Market Homes In Pre-Foreclosure
When I got there, I found the house looked just as nice as the others on the block—at least from the outside. Rather than just take some pictures and drive by, I decided to investigate further. After knocking and waiting a few moments without an answer, I went to a window and peered inside.
At first glance, everything looked fine – although one part of the house seemed unusually dark. Upon closer inspection, I realized why: There was a fire.
Instead of writing off the asset at that point, I took a closer look and came to the conclusion that the loss was actually not that bad.
Come auction day, the other investors were clearly aware of the damage caused by the fire; Almost nobody wanted to bid. These investors did Some Homework, but I doubt they looked closely enough to really assess the extent of the damage. Since I had seen the damage caused by the fire with my own eyes, I was confident that we could carry out the necessary repairs and still secure a decent profit – if we could buy it at the right price.
Connected: How to Beat the Competition and Find Deals by Shopping Before or After a Sheriff’s Sale
With very little competition, we bought the property that day at a great price. And as I suspected, thanks to a little extra diligence, all it took was a little help from a fire restoration company and a fresh coat of paint to get the property ready for resale—minor expenses when it comes to fixing up and flipping. The matter comes
The deal was so profitable that we decided to buy another foreclosure with fire damage shortly after.
Before bidding on a foreclosure at auction (or writing one off), do your due diligence and find the time for a drive-by inspection. This simple step could save you from making a costly mistake. Furthermore, it will give you the added edge you need to secure low cost assets with very high profit potential.
In bid to buyIn an upcoming book I co-authored with David Osbourne, we outline our entire drive-by process. And All the other steps we take to research and buy foreclosures at auction. Get your copy now from BiggerPockets Bookstore.
Have you bought property at auction? How did this happened?
Join the discussion in the comments section.
Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.
