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Question: “How Do You Bid On A FORECLOSURE AUCTION?”

This is an interesting question.

I’m gonna answer this question because I have the overall experience in real estate investing.

How do you bid?

The bid foreclosure is essentially when the lien order is about to take away a piece of property,

…when you don’t pay the payment that you promised in the contract of some shorts and some kind of promissory notes, you default on it,

You haven’t paid, an example of a promissory note is a Mortgage.

Any kind of agreement for payments and you stopped paying, and then they can slap a lien on your property,

…then they can attempt to legally foreclose on your property, which means to take away the property from you.

After they take away the property, they auction those types of properties.

It could be because of tax liens or it could be because of mechanical liens.

Actually, contractors have the power to put a lien on your property if you don’t pay them their money.

There are few types of liens out there.

The most popular is the mortgage that you probably know about.

Foreclosure Auction is when you don’t pay your $300,000 as you promised,

…you pay like, six years and then you get into trouble, you’ve lost your job and you can’t afford it now,

Then they foreclosed on you.

So a lot of investors show up to these events to bid on those properties.

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Bidding meaning, you say, “Hey, this is how much I can afford it”.

What they do is they set an initial bid price, I forget what they call it because I don’t do this.

We’ve done it before but I don’t advise it.

But just like a regular auction, like an auto auction, there’s a starting bid.

That’s what they call it, it’s a starting bid.

A property worth $200,000, the starting bid could be $105,000.

Then you said, “You know what, I’ll put my bidding at $110,000” and then you have another person say, “You know what? I’ll pay $112,000”.

…and then another person will come in and say, “I’ll pay $120,000”, then the adrenaline will start rushing because now you’ve invested and you want to win because everyone wants to win.

Most amateurs will go there and then basically get into a bidding war and then forget that they’re buying this particularly for an investment purpose and then over pay for a property.

Have I seen such examples before?

It happens all the time.


Because they’re the people that I end up saving sometimes.

Because we have another part of the business where we actually help people that are in foreclosure or people that got in trouble.

A lot of them pick up these houses in this terrible manners.

So that’s where the question is coming from.

How do you bid on a foreclosure auction?


You bid on a foreclosure auction in the same way you will bid on any house.

You need to do your homework, you need to know the property.

There’s a good chance they won’t let you in the property and there will be a “do not trespass” sign on the property, especially if it’s vacant and you’re not supposed to go trespass.

You do that at your own risk.

But if you know the business enough, you’ll be able to make a bid based on the market value in that area based on potential things that would have been damaged in the house.

If you know that area, then you can make a bid but here’s the requirement:

You need to know what you’re doing in terms of the value of the property.
The value of the neighborhood within one mile, radios in the last six months of that location.

You need to know what’s going on, and you need to pre-set the price you’re willing to pay for that property before you show up to an auction.

So when people start going to the bidding war, you know where you stop and there’s no emotions.

There’s no emotional attachment, nothing like that.

You know where you stop, you’re just like “Okay, this is over. I can’t. You know , my price is $112,000. If anybody outbid me, I back out and there’s no hard feelings”.

That’s how you set a bid for a foreclosure auction.

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The way to not do that is don’t get into a bidding war and don’t go there to get emotional,

…because a lot of those properties, you don’t know what’s going on in them and you’re just gonna get in trouble if you get into a bidding war.

There’s always gonna be surprises when you’re dealing with properties that need work, especially if it’s in a bad neighborhood.

There are going to be surprises so you already can’t afford to be paying more than a preset price.

Based on the criteria that I exposed to you, that can become a potential risk in the business of flipping houses.

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