After looking at dozens of houses, going through inspections on plenty of them and finding out that the $150k 1960's era house typically required another $25k in repairs, we decided to try another route.
We stumbled on an owner-occupied house in the area we were looking at that was to be auctioned off. We made sure that our financing was in order and went ahead, cash in hand, ready to put a down payment on a house that we would win at auction.
Let me tell you -- the auction process can be a bit unnerving. The auctioneers walked around the hotel conference room, eying up all of the potential buyers and trying to jack up the price as quickly as possible by the thousands.
My strategy? Keep on upping the bid, but by small dollar amounts. I went as far as to up the bid a couple of times by $10! But ultimately, we "won" the bid, and at a substantial discount to the house's appraised value! So we immediately gave the auctioneer the 10% deposit on the property and were excited that we would be moving into our new house soon. We had never come this close, so surely this would be the end of our house hunting, right?
Enter the cheesy owner, stage left. We were waiting for a couple of things to be completed on the auctioneer's side of the sale, particularly getting a clear title. Unfortunately, unbeknown to the auctioneer or us (but not the owner), the owner of that house suddenly had a hefty lien levied on the title on the DAY OF THE AUCTION!!!
The auctioneer was holding onto our money (interest-free, of course), and it seemed they were unable to get in contact with the owner in order to determine how this would get resolved. The good news was that the contractual obligation we had in purchasing the house through the auctioneer required that they deliver the lien-free title within 30 days of the completed auction.
Even though the deposit we made was supposed to be non-refundable, because they ultimately were unable to fulfill their end of the contract, we were able to convince them -- without the need of an attorney -- that they really needed to give us back every cent that was deposited after those 30 days were up. Glad I took that contract law class back in my college days!
Ultimately, things worked out better for us in the grand scheme of things. We ended up finding another house in the same general vicinity within the next month and moved in shortly after. Because we had already gone so far with our financing paperwork for the auction house, we were able to close very quickly. That is what the sellers of the house needed more than the asking price.
We have been living at this house now for four years, and when we reflect on that ridiculous auction experience, we realize that we ultimately got the better deal by NOT ending up with the auction house. Our house, it turns out, is in a less heavily-trafficked area, has another bedroom, an extra formal living room area and a nice fenced-in yard that keep our dogs from running all around the neighborhood.
My advice, from my experiences?
First, there is a good possibility that a house deal will fall through for one reason or another, and it may have nothing to do with you. Don't bother picking out the paint colors until you have the title and keys in hand.
Second, if things fall through, get back up and continue looking. You're sure to find something, eventually, and there is a good chance that you will find something even better the next time.
According to the FHA lending guidelines, is it possible for escrow to be paid out of packet instead of rolled into the loan? What are the guidelines for a 2nd time home owner? These are answered below…