While We Wait

After a couple of disappointing auctions, we’re confident that our next auction purchase will be a success. We’re due, right?

We found an adorable “cottage” in the Five Points area of Raleigh. It’s actually a duplex condo in a large community of 2 bedroom 1 bath homes in a popular area of the city.

On auction day, we bid our maximum. Let’s hope it holds as we believe our bid is the highest price with room for profit. Another bidder would pay an additional 5%.

As we wait out the 10-day outbid period, we stay busy with honing our reno skills and pricing materials. The big box stores like Home Depot and Lowes offer free weekend classes to learn skills like backsplash tiling, faucet installation, and operating power tools.

Jennifer and I attended the tiling class to learn more about tiling mosaics, glass, and other popular materials.

We also wanted to learn about the latest tools. For example, do manual tile cutters cut glass tiles? Yep, they sure do. This tile cutter is our favorite.TileCutter

The Rubi Speed 26″ Tile Cutter. At $149 from Home Depot, it’s a great investment.

We also learned what a huge impact the color of your grout can have on the look of your tile. For example, we used a beautiful mosaic with light blue, beige, and white tiles. But, when we applied a grey grout, the light blue turned to purple. Not so beautiful anymore.

Take note: If you love the color of your glass tile, use white grout to keep the look the same.

The great thing that these free classes provide is confidence. With knowledge and practice, you really can do almost anything.

 

 

Seriously?

After the disappointment of losing the auction we thought we’d won, we set out to find our next property. With no online auctions available, we chose to search the auctions currently in “outbid period.” This means that these homes were auctioned at the courthouse already, but, due to North Carolina law, they sit with the county clerk for 10 days to allow for others to place an upset bid. (Only a couple of states have this process.) If another buyer places an upset bid, the 10-day period begins again. This process continues until the 10-day period passes with no more bids. Painful.

In reviewing these properties, we found a great home in a great location in Cary. Cute right?

Westview

Over 10 different companies placed upset bids (some more than once), and over 21 upset bids were recorded. (To place an upset bid, you must bid at least 5% more than the last bid, and you must deposit 5% at time of bid.) We believed that we could win this auction if we bid the maximum price for this house and still remain profitable. That number was $129,000.

Take Note: In coming up with our maximum bid, we look at the ARV (After Renovation Value) of the property. What price will the renovated house sell in the current market? If we take that market price and subtract the bid price and renovation costs, will we have a profit?

After 10 days, we WON!! Our strategy worked. (Worthy of a picture of Jenn in front of the courthouse.)

JennCourthouse

When we researched the property before bidding, we knew that the property owner’s second mortgage was foreclosing the house. NOT the first mortgage. We determined that our auction bid was enough to cover the second mortgage (about $10,000) and the first mortgage (less than $100,000) along with legal fees.

Take Note Again: All county property records can be found on your county’s web site. It’s a great resource to do a title search and understand more about the property owner’s history. It’s best to also hire a real estate attorney to do a thorough title search.

Unfortunately, the Trustee for the second mortgage would not agree to pay off the first mortgage with the auction proceeds, even with the agreement from the first mortgage company and the home owner. This means that if we continued with the auction, we could be responsible for the first mortgage, even though we paid $129,000 for the home. In fact, any surplus from the auction (i.e. $100,000) could end up going to the delinquent homeowner! Seriously?

We could not take that risk, and we backed out of the auction. We’ll be charged the re-listing fees for this home to go back on auction along with our legal fees for the title search. An expensive but important lesson.

We’ll get the next one for sure!

 

Our First Flip…Well Maybe Not

Ashby

Since starting our company Magnolia Properties of Raleigh, we’ve learned a lot. And, the biggest lesson we’ve learned is that nothing is for sure.

After months of research and preparation, we felt ready to bid on our first house. Time to flip!

We found a house in an established neighborhood off Atlantic Avenue. Perfect size and a price we could manage. It was vacant so we didn’t have to worry about eviction.

The house was being sold at an online auction through Auction.com. In advance of the auction date, we submitted our registration and credit card, committing us to a 5% deposit if we won the auction.

The auction lasted three days, and, during the last hour, we watched the bid amounts rise to exceed the minimum bid. (Most online auctions have a minimum bid in order for the house to sell.) During the last 60 nerve-wracking seconds, we placed our bid for $90,000. Going once, going twice…we won!!

We immediately received a phone call from the auction company confirming our win. Within 24 hours we completed the paperwork including proof of funds, and we wired our 5% deposit. We couldn’t wait to get our hands on the house to make it beautiful.

Unfortunately, a few days later, we received a call from Auction.com that the auction was cancelled. What?! How does this happen? Yep, the house had been previously sold in a live auction months before. It wasn’t meant to be.

Chalk it up to a learning experience. Now let’s find another property.