I figures the ARV to be around $182,000. and I figured the rehab budget to be around $20,000. but no inspections were allowed, which infused a risk premium into the calculus. I had to leave myself some room for (a) underestimating the rehab budget, and (b) profit.
all it would take is to learn that the CHA needs to be replaced, ot that the place had water/termite damage, and the profit could be slashed or rubbed out. and there was no way to know.
as for the financing. the terms are published online. go to www.hud.gov and click on “houses for sale.” there, you will see links to 6 or 7 federal agencies with properties for sale. click on the IRS and go to their list. in this particular deal, I would have had to hand over a cashier’s check for 20% of my winning bid within 2 hours, and the balance in 30 days.
this arrangement keeps a lot on investors away (which I like).
I mentioned this last week. attended auction for 1850sf Austin home today. unlike previous IRS auctions I attended in CA and NV, this one was not swarming with bidders. only 9 people pulled bidding cards. [I find this promising for future auctions].
My analysis told me not to go over 123K for the house, based on my opinions of the ARV, the rehab budget and my profit requirements. deal went off at 127K. [this is also encouraging for future auctions. no crazy auction fever like I saw in CA and NV 4-5 years ago].
I’m pretty sure the high bidder was a realtor. andif I’m right, it confirms that my 123K calculated max was a good one. the 2.5% he will pocket as the listing agent puts his net investment exactly where mine would have been at 123K.
Re: Post-Mortem on IRS Auction - Posted by DaveB (NJ)
Posted by DaveB (NJ) on April 16, 2007 at 18:35:12:
Jimmy,
Sounds like your analysis was spot on. What did you think the ARV of
the house would be? Also, since I haven’t engaged in an auction myself
but have been considering it, would you have needed $12,700 in
cash–10 percent–at the auction to secure it? And is there some
stipulation on how quickly you need to finance the rest of it? Or did
you need more cash actually at the auction?
I went to an IRS property auction in Myrtle Beach SC a few months ago. The auction rules required me to bring a $10K cashier’s check for my deposit if I happened to be the winning bidder. Balance of the bid was payable in full at settlement within 30 days