To know how to bid at an auction, it’s important to know when it’s best to lose a bid at an auction: When the price goes too high to be a low risk investment.
When attending auctions, you will not be the winning bidder on many, likely most, of the properties you research to bid on, and that’s not a bad thing as long as you’re prepared to bid and avoid the risk of a bad investment.
Always leave enough margin for error and unforeseen contingencies. That’s exactly what I do at every tax deed auction: Avoid risk by not bidding too high.
I’ll explain this with an auction example.
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Bidding at an Auction Example
I attended a small auction in North Florida. The property I was interested in had a tax assessment of $302,808, and a minimum bid of $21,142.24.
Research on the internet supported the assessed value with a large two-story home on 10 acres of land with a pool and horse stable.
All the neighboring properties were also 10 acres with about half of them having completed homes and more being built each year. I was ready to bid on this one.
What To Do Before You Bid At an Auction
After researching a property on the internet, the next step to know how to bid at an auction is to view the property in person. In this case, the property was no longer occupied, and I took a closer look.
Upon closer inspection, I found, as would a knowledgeable real estate agent, home inspector or property appraiser, that the home was in need of at least $50,000 in repairs to bring it up to its full value, but otherwise in sound shape.
I therefore estimated its quick sale value at $150,000 to $165,000.
Your Auction Bidding Strategy Needs to Include an Exit Strategy
Not being a beginner in this business and being knowledgeable with the area and current home values in the area, I was prepared to bid $65,000, or about 1/3 of its full value and about 40% of a quick sale price.
I told Ted of this property, and we discussed its full value and my confidence in that quick sale estimate.
He said he would invest with me so we could together bid more if needed (all I could comfortably invest at that time was $65,000).
We agreed that with the assurance that the property could be quickly sold for $150,000 to $165,000, a maximum bid of $100,000 would be reasonable. That could result in at least a $50,000 profit in just a few weeks.
Don’t attempt a deal like this as your first tax deed purchase; it took me a while to have the knowledge to proceed with this level of confidence in a selling and purchase price, and I had Ted as a coach.
As you’re learning how to bid at an auction, start slow and bid conservatively, especially if you are not very familiar with the area where you are bidding.
Buying Property at Auction Risks: Overbidding
In this case, the bidding went up above $100,000, and the property was sold for $164,000 to a person, who wanted to fix it up and live in it.
Not a good deal for an investor, but a very good deal for a retail home buyer, who was the winning bidder on a property worth over $200,000.
This particular case study is a lot more complex than revealed in this short write-up, and a more in-depth presentation is a part of Ted Thomas’ video training material.
If you’d like to get started today, you can begin now at no cost by taking advantage of Ted’s FREE Master Class. It’s only about 1 hour of streaming video and will open your eyes to the incredible opportunities available in tax delinquent real estate investment.
The essential messages here on how to bid at an auction are that to minimize risk, have someone look at any property and evaluate it for you before you bid on it.
That quick assessment I made, by looking at the home, let me know the reasonable repair costs that could be expected. That allowed me to more accurately assess its quick sale value. “Buy low and sell low quickly.”
When the bidding got to a point where my safety margin and quick sale price were not achievable, I stopped bidding. Someone else got the property, I didn’t make a risky investment, and Ted and I have the funds to bid another day.
How to Bid at an Auction: Conclusion
This case study on how to bid at an auction shows you by example the homework involved in determining how much to bid before you even get to the auction.
How do you bid properly? Before you bid, you need to know your exit strategy, in other words, how much you can sell the property for.
You need to assess the value of the property, view the property to assess its condition and if repairs are needed, and know the property values in the area to determine a sale price.
Then bid at the auction with your profit margin in mind, also keeping in mind that you want to leave some margin for error and unforeseen contingencies.
Don’t exceed your exit strategy when you bid. It’s better to just stop bidding and let another bidder win, than to bid too high, especially if your objective is to buy it low, sell it low and make a quick profit, like Ted Thomas teaches.
To learn all the ins and outs of tax lien and tax deed investing, including how to find and vet properties, assess the best candidates, learn the auction rules, how to bid at an auction, and the whole process involved, there is no better teacher than Ted Thomas.
Ted has been educating students about tax lien certificates and tax defaulted property investing for over 25 years, showing students how to turn it into a cash flow machine.
Ted Thomas is America’s leading authority on tax lien certificates and tax defaulted property investing, and he provides full support and a complete training program with home study courses, live tutorials, workshops and web classes, Q&A sessions and personal one-on-one coaching.
If you’d like to get started today, you can begin now at no cost by taking advantage of Ted’s FREE Master Class. It’s only about 1 hour of streaming video and will open your eyes to the incredible opportunities available in tax delinquent real estate investment.
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