If I told you that by bidding in Buffalo, NY’s tax foreclosure auction you could get a great house for only $500, you would either sign up in a heartbeat or ask me if I was joking. But honestly, it would be smarter to ask if I was joking. While the opening bid might be $500, you will likely end up paying a lot more than that if you won the bid, and you might not get a good house.
The Buffalo, NY tax foreclosure auction is where a lot of investors go to buy a house. It’s not the worst place to look for a foreclosed house but it’s not the best, either. If you don’t know what to expect before placing a bid, you could end up hurting your business.
Here, I’ll tell you what to expect when it comes to buying a house in Buffalo, NY’s tax foreclosure auction and a potentially better way to purchase properties from homeowners in financial distress.
Why Some Investors Like the Buffalo, NY Tax Foreclosure Auction
If you’re flipping houses in Buffalo (or anywhere around Erie County), you know the importance of finding good leads. A good lead here is defined as a house that you can buy for a low cost, can afford to renovate if needed, and still sell for a profit.
The good news is that there is a lot of good property in Buffalo. Our history has meant that a lot of houses were built here, during the height of industrial prosperity and middle-class stolidity. That usually means that foreclosures are sturdy, well-built houses. If you know the market well, you can buy a foreclosure without losing your shirt.
Buffalo is beginning to see an influx of residents, especially people who want to escape the really big cities but aren’t exactly ready to go rural. That’s a big reason why Buffalo real estate is a good bet right now.
Mortgage forbearance and economic stimulus payments have forestalled foreclosures, but some relief periods are ending. More and more houses are being placed on the market and many are going straight to the foreclosure auction run by the Erie County Real Property Tax Service.
If you plan to attend the tax auction to purchase a foreclosure in Buffalo, NY, have an open mind. You might not get what you came for but there’s a chance that you may come out with a win.
The Pitfalls of Buying a Foreclosure in Buffalo, NY’s Tax Auction
Here are a few things you need to consider before bidding in Buffalo, NY’s tax foreclosure auction:
COVID-19 Has Impacted Foreclosure Auctions
We know that the pandemic made it a good time to start investing in real estate—in Buffalo and many other places. There is a lot of built-up demand in the market. But, that’s compounded by the reality that COVID-19 relief and other hardship injunctions have restricted the normal foreclosure market. Many foreclosure auctions were closed throughout 2020.
Now that they’re opening up again, there will be a lot more houses up for auction. But that may not always work out in your favor, especially considering that there will also be competition.
There Is a Lot of Competition
With the market opening up, everyone who is already investing in real estate (or anyone who wants to) is likely going to be participating in the auction. It’s likely that every house will have a lot of people bidding on it. You might walk away empty-handed. But that might not be the worst outcome.
The Price Will Go Up
At many auctions, the opening bid doesn’t go lower than $500, but the “referee” can choose to make the opening bid higher. Though, regardless of where the opening bid is set, it’s not likely that you’ll win the bid at that exact price. With the amount of competition at auctions, the prices will be driven up, especially if people get desperate to get a house.
Auctions Aren’t Created With You in Mind
Foreclosure auctions aren’t really created with investors in mind. They’re designed for the county and any financial institutions to be repaid for any missed payments that led to the foreclosure. As an investor, you’re the vehicle for allowing these institutions to do so. That’s why there are rules such as:
- You aren’t allowed to inspect the house. You have no idea how much work you’ll have to put into it, which can eat into your budget.
- You have to pay 20% of the winning bid amount upfront. As soon as you win the bid, you have to hand over cash or a certified check. Hopefully, you have enough liquid cash on hand as prices tend to go up more than you may have initially expected.
- You have 30 days to come up with the rest. You have to get your loan money fast, which means finding a reliable hard money lender. If not, you’ll have to pay interest until you do.
- You are responsible for taxes and liens. If there’s money owed on the house, you now owe that money. The terms of the sale go toward paying them back first, but anything over the cost of the sale reverts to you. You may not be aware of these taxes and liens when you bid.
- Insurance. You have to pay insurance on the empty house in case of vandalization or damage.
The Buffalo, NY tax foreclosure auction is a way to get a house. But it’s also a way that can end with you holding onto a money pit. Luckily, there’s another option.
The Better Way To Get Property in Buffalo
In this business, time is money, and you can’t afford to waste either one. Unfortunately, a foreclosure auction can result in you losing both. To avoid losing, I don’t count on auctions to purchase foreclosures. It became a lot easier to avoid foreclosure auctions when I invested in an independently owned and operated HomeVestors® franchise.
As a franchise owner, I can take advantage of HomeVestors®’ nationally-known We Buy Ugly Houses® campaign. People who have distressed houses in Buffalo call HomeVestors® before they go into foreclosure. Then, the lead can be sent my way. This way, I get to inspect the house and work with a motivated seller. They’re typically looking for a fair price and want to avoid the hassle of foreclosure.
Getting leads through HomeVestors® doesn’t involve the competition that comes with bidding in Buffalo, NY’s tax foreclosure auction and I have the chance to invest in much better properties. There are also fewer headaches and unknowns. I even have a hard money lender portal that lets me easily search for the best rate. It might not mean I get a house for $500, but becoming a HomeVestors® franchise owner is the best option for my business goals.
If you’re considering investing in real estate in Buffalo, request information about becoming a franchisee today.
Each franchise office is independently owned and operated.