I invest in real estate all over New York, but I hold a special place in my heart for my hometown of Rochester. Though I live in Buffalo now, I recently started mentoring a young investor in Rochester, which means I’ve gotten to spend a lot more time in my favorite city. I was grabbing lunch with her the other day when she asked for advice about buying an investment property from a real estate auction. She’d heard these auctions were a great way to find deals on distressed homes, but she wasn’t sure how they worked or which auctions were worth her time.
Like many new investors, she was drawn to real estate auctions because of the low starting bids and fast closing times. Auctions seem like a great way to make fast deals and large profits without going through the hassle of chasing down leads or paying for marketing. As I explained to my mentee, though, buying from a real estate auction in Rochester, NY may be more hazardous than you think.
Buying From a Real Estate Auctions in Rochester, NY
I’ve attended quite a few real estate auctions in Rochester, so I have first-hand experience with both the benefits and drawbacks. There are a variety of different types of house auctions in Rochester, and each comes with its own risks and rewards. Some of the most popular real estate auctions include:
The City of Rochester Tax Foreclosure Auction
The city of Rochester frequently acquires vacant, abandoned, and damaged homes when the owner is unable or unwilling to keep up with the taxes and maintenance. Then, several times a year, they auction off these homes to investors who can restore them to good use. The goal is for these homes to be renovated and occupied, to help reduce neighborhood blight and increase both tax revenues and property values in the area. Generally, the starting bid for these homes is whatever the outstanding tax bill is—which may be as low as $400.
This may sound like a great deal, but you have to remember that most of these homes are in very poor condition. Most of them have sat vacant for a long time, so they may be uninhabitable or even dangerous. So, you’ll need to mentally add the cost of significant renovations to the cost of your winning bid. That means you should do your due diligence on any properties you’re interested in before the auction actually begins. Unlike many other city real estate auctions, Rochester gives you the opportunity to schedule a home inspection before you decide how much to bid on the property. You should take advantage of this opportunity, so you don’t end up purchasing a money pit that eats up all your potential profits.
Also, regardless of how low your bids are, you’ll need to show proof of funds in the amount of $10,000 for each property you plan to bid on. If you win, you’ll also need to pay a $1,000 deposit (in cash or a cashier’s check) immediately at the close of bidding. Then, you’ll only have one week to pay the balance plus assessed taxes and the deed recording fee. Despite that quick payment timeline, you’ll still have to wait for city council approval before you can begin your renovations, which can take several months. Once you get that approval though, you only have 12 months to bring the property back to code, finish your renovations, and obtain a Certificate of Occupancy.
So, not only is purchasing a property at a foreclosure auction more expensive than you might expect, but it also comes with a lot of extra hassles. That’s why I always steer new investors away from these auctions.
Online Auction Websites
There are a variety of online auction websites that list foreclosure properties in Rochester, NY. These websites provide a faster and easier way to browse foreclosures, research property details, and make bids. Some sites, such as the City of Rochester Division of Real Estate, deal specifically with foreclosures and distressed properties, while others also list traditional homes for sale.
Online auction websites are very convenient, but that means a lot of people use them. Their inventory tends to be fairly limited, and there is steep competition for every single property. It’s easy to get sucked into bidding wars and end up spending way more than you can afford. Also, you might not get the chance to inspect or even physically view the property before bidding. If you’re lucky, there will be plenty of pictures and a detailed description of the home, and there won’t be any major issues lurking beneath the surface. Most of the time, though, you won’t know what you’re paying for until it’s too late.
I’ve used online auction websites in the past but have only seen middling-to-bad results. Though they seem convenient, you’ll have to compete against many other investors to bid on a limited inventory of homes, plus there is significant risk involved.
Private Real Estate Auctions
Since bidding on foreclosed and vacant properties is so risky, some investors decide to look at private real estate auctions instead. Private auction homes are usually still inhabitable and current on taxes, but the owners are motivated to sell quickly for financial or personal reasons. Private auction companies, such as Harris Wilcox in Bergen, represent these sellers similarly to a real estate agent. You can often use traditional financing and mortgages at private real estate auctions as well.
However, the downside is that properties at a private real estate auction are often listed at normal market prices, so you’re less likely to find really cheap investment homes. You’ll also need to pay both a $10,000 deposit (in cash or cashier’s check) before you bid, and a 10% buyer’s premium if you make the winning bid.
So, private real estate auctions are a less risky way to purchase an investment property, but they’re also more expensive. To me, it feels like you lose all the benefits of purchasing a property at auction in the first place.
Overall, I’ve never found real estate auctions in Rochester, NY to be worth the time and hassle. These auctions are either too risky, too expensive, or too competitive for most independent real estate investors. Luckily, I found a much better way to get leads on investment properties.
Getting Easier Access to Leads on Distressed Properties
After discouraging my mentee from buying property at a real estate auction, I let her in on my secret to finding leads on distressed properties in Rochester: joining the HomeVestors® network. As an independently owned and operated real estate investing franchisee, I get access to some of the best marketing and lead generation tools in the industry. That includes the nationally known and trusted “We Buy Ugly Houses®” marketing campaign, that motivates home sellers to contact me to purchase their distressed properties. I don’t have to waste my time at property auctions or searching through online listings, because quality leads come straight to me instead.
Before you buy from a real estate auction in Rochester NY, reach out to HomeVestors® for more information on becoming an independently owned and operated real estate investing franchise.
Each franchise office is independently owned and operated.