Bidding to Buy

A Step-by-Step Guide to Investing in Real Estate Foreclosures

David Osborn, Aaron Amuchastegui

• Éditeur: BiggerPockets
• Année: 2020
• ISBN:
  9781947200340
• Sujet: Betriebswirtschaft
• Sous-sujet: Immobilien

Welcome to the world of buying foreclosed homes at auction—a real estate strategy that lets you remove the middleman, decrease your competition, and buy at a discount.

Bidding for properties on the courthouse steps while competing in real time with other investors is a thrilling experience. There's nothing like it in the world of real estate, but there's also a lot to learn. With dozens of insider auction secrets that are proven to help maximize returns, Bidding to Buy will show you the skills you need to successfully bid at auction, then turn a healthy profit on your investment.

Successfully buying foreclosures isn't a matter of luck, and it isn't for insiders only. However, it does require a process —one that can be repeated for optimal returns. In this book, you'll find a full blueprint of the foreclosure process, including the repeatable five-step method that the authors have used to buy thousands of properties.

Discover a new kind of real estate investment and uncover profits on your local courthouse steps!

Inside, you'll learn how to:

• Find properties before they are broadly exposed to the market
• Understand the entire foreclosure process and how it differs from state to state
• Conduct complete title research and develop an eye for red flags
• Navigate the potential risks and pitfalls behind a live auction
• Access property listings and early posting data
• Build an accurate financial analysis on any available property
• Acquire creative and alternative financing methods, including no-cash solutions
• Complete critical post-auction steps, such as evicting tenants

INTRODUCTION PART I

Love, Foreclosures, and the Freedom to Choose

On the surface, this looks like a book about real estate.

Specifically, it looks like a book about one type of real estate investment that for both me and my co-author, Aaron—as well as thousands of others—has been incredibly rewarding.

But that’s just on the surface. What lies underneath is more like a love letter—a testament to our unwavering belief that real estate is the greatest tool in history for not only building wealth but taking control of your life.

Believe me, I know. Starting out broke and unemployed at age 26, I had begun selling homes simply because I had to do something. I was a C student with an uneven track record and only the murkiest idea of where I was headed. Yet, ten years later, I went on to build one of the top real estate brokerages in the world.

For me, real estate checked every box. It was safe, it gave me leverage, it provided cash flow. If nothing else, I could drive by a house I owned and just look at it. Heck, I could move in if I really had to.

At some point, I made the mistake of thinking I could do the same thing in the stock market. And for a while, it seemed like I could; my portfolio kept climbing in value, and the only downside seemed to be kicking myself for all the market years I’d missed out on.

That is, until I lost it all. Not long after my fist-pumping, high-flying success, the market tanked and so did my net worth.

I was shattered. That had never happened to me in real estate. Sure, the housing market was cyclical, like everything else, but through careful buying, I had cash coming in even during down times. Better still, I had real assets I could see and touch.

It was now painfully clear that I couldn’t say that about stocks. I realized that, for me, they were just numbers on a screen. I knew they were assets, but I couldn’t internalize them. I couldn’t fall in love with stocks the way I had with real estate.

So I dusted myself off and doubled down on what I knew to be true. Less than a decade later, I found a new love. It was still real estate, but now I was buying foreclosures—hundreds at a time. The numbers were huge, but at the end of the day, I could still drive past any one of those homes and say, “Yup. Still there.”

Since then, I’ve never looked back. To this day, the vast majority of my wealth is real estate-related. I love it, plain and simple.

To be clear, it’s not the money I love. That’s only a means to a much more important end: the freedom to do the things I choose with the people I love. A nine-to-five job can’t give me that freedom, and it won’t give you that freedom either. For that, you need to be in business.

You could start a tech company. You could become a restaurateur. You could open a retail store or a factory. The sky’s the limit.

Of all the possibilities, however, real estate is the simplest business I know of. You get to buy something of value and then immediately use it to make money. You don’t need a staff. You don’t have to build products or open a store. You buy a house, rent it out, and voilà: you’re in business.

Try doing that with a restaurant or a tech company.

The foreclosure business is like a machine for making money, but you get to see exactly how the machine works. There are no hidden parts. There’s no mystery.

Foreclosures also shine in one special area. They offer you all the advantages of real estate with one more game-changing bonus: You get to buy at a discount.

That’s big. Ask any investor or entrepreneur what the secret to building wealth is, and invariably their answers will lead you back to something that rests on the idea of buying at a discount: Buy low, sell high. Never lose money. Lock in your margin. Build in a safety moat.

Buying real estate at a discount gives you options like no other investment. Your costs are lower. You have cash flow.

That is the real story of buying foreclosures on the courthouse steps. It’s a chance to create a near-instant business with a safety margin, one that can start delivering cash back to you almost immediately. Meanwhile, someone else is paying for that business. And when you’re done with it, there’s a bunch of people standing in line to buy it from you.

That’s what I love, and that’s why this isn’t just a book about real estate; it’s a book about freedom, about taking control of your life and living it the way you want to.

There is, of course, a caveat. It would be easy to read this and think foreclosures are foolproof. They aren’t. Real estate is simple, but it’s not always easy. To manage risk, I’ve relied on the single most powerful tool in my kit: discipline. I’ve bought thousands of homes, and for all of them, I’ve used a system. I’ve used a system to find them, a system to analyze them and choose the best ones, and a system to buy them.

This book is about a reliable method not just for buying real estate but for moving a little bit closer to true freedom every day.

How could you not fall in love with an investment like that?

Thanks for joining us on this journey.

—David Osborn

New York Times best-selling author of Wealth Can’t Wait

INTRODUCTION PART II

Finding Profits on the Courthouse Steps

In 2009, I was going out of business.

That might sound like an event, but going out of business is a process. It takes time—painful, slow-motion, can’t-sleep-at-night time.

My partners and I were home builders, which was a great business to be in…until it wasn’t. After the housing crash, everything changed and we were left worrying about how to make payroll and pay the bills.

Watching our business dry up did leave us with more time, and we used it to do what any true entrepreneur does when facing failure: look for a new business. That may sound crazy, but as you’ll learn, falling in love with difficult problems is a kind of superpower. With any luck, by the end of what follows, it will be your superpower too.

We had heard of people who were making money by flipping foreclosures. I was skeptical—it had a vague, get-rich-quick feel to it. Still, it was related to the skills and experience we had, and I thought it was worth looking into. It was certainly better than feeling powerless as our business slowly evaporated.

The people we knew were finding homes listed on our local MLS, or multiple listing service—a database of properties for sale. The idea was simple enough: find a home that someone had stopped making payments on, buy it cheap, then fix it up and resell it for a higher price.

What, we thought, could be any easier? After all, we were home builders. We were experts at this kind of thing. How hard could it be?

Harder than we thought.

We spent hours, then days, then weeks trying to buy foreclosed properties through MLS listings. There were five of us, and we wrote hundreds of offers. We made offers with no conditions. We made offers in cash. We did everything we could think of that you would normally do to buy a damn house on the MLS.

Not one offer was accepted.

A Different Kind of Foreclosure Listing

At the time, foreclosure was a word we were hearing a lot. It was 2009, and people were losing their homes every day. Still, we had only the most basic understanding of what foreclosure meant and how it worked. As we understood it, when someone stopped making their mortgage payments, the bank eventually took possession of their home. That meant the loan had been “foreclosed on,” and the homeowner lost their property to the lender.

That was essentially true, but it didn’t explain why we couldn’t seem to buy one of those houses people had stopped paying for. We were utterly confused.

What we didn’t realize at the time was that we were trying to buy homes in the wrong place. Not “place” as in geography but “place” as in the wrong point in the timeline of the foreclosure process.

When a foreclosure is listed by a Realtor on the MLS, anyone can see it, and they can do so from the comfort of their home. The MLS is where everyone is looking. The competition for properties is high, and as we soon realized, the Realtors listing those properties already had preferred clients they were working with. We simply couldn’t find our way in.

We had no idea there was a whole different arena for foreclosure sales—places where properties were bought before they ever made it out into the wider public eye.

The Aha! Moment

As luck would have it, one of my partners discovered that a property right beside his was listed for foreclosure. Curious, we tried to find out more, but the property was nowhere to be found on the MLS—it wasn’t online anywhere. The only information we had to work with was the physical foreclosure notice at the home itself. It listed a date when the property would be sold at auction and an address where the sale would happen.

The address turned out to be the local courthouse.

That was when the lightbulb went on. Suddenly it made sense. There was a whole world of properties being sold at auction before they were ever picked up by real estate agents or listed on the MLS! We’d been swimming in a sea of competing buyers when the real deals were happening upstream—they were happening earlier in the foreclosure timeline.

We went to an auction the very next day.

We weren’t there to buy, just to observe. The problem was that it was difficult to tell exactly what we were seeing. It was an oddly informal process. As far as we could tell, only a couple of buyers were there, and the closest thing to someone in charge was a guy who stood there and read out a list of information.

We tried to ask how it worked, but no one really wanted to tell us. At the time, there was no how-to resource we could turn to. With only days to go until the auction on the place we’d found, we’d have to figure it out for ourselves.

I spent the next two days in the county recorder’s office reading every document I could find on the property we were interested in. We did our own title searches to be confident that we knew exactly who owned the property and who was owed money for it. I read page after page of legalese.

Eventually, I decided: We can do this.

The Courthouse Steps

Our first auction experience was nothing short of bizarre. I still look back at it with a mix of amusement and shock.

We arrived at the courthouse at the appointed time but had no idea where to go or what to do. Instead, we just hung around the courthouse steps in a corner near the entrance. There was just us, a few other people who we assumed were also there to try to buy property, and a garbage can. That was it.

A few minutes later, I looked up to see a guy in a T-shirt and shorts roll up to us on a skateb...