If you’re looking for a home, you might be comfortable with breaking even. Maybe there were no other affordable homes aside from the foreclosure fixer-upper in that neighborhood, and it’s in the school district you want your kids to attend. And if you’re going to be living there, you aren’t going to be concerned if the market takes a downturn in the short run because you plan on living there for the foreseeable future. You won’t have a mortgage to worry about, in any case. But if you’re an investor, you’ll be much more concerned about short-term real estate market risk. You’ll probably want to discount your bid to take into account a risk that the market will suffer a downturn. So, we’ll subtract 10% from the bid price to protect you from that risk, which would bring your bid down to $175,000. Moreover, no serious investor would ever assume that there was any kind of cap on the cost of repairs. Investors will also want to make a profit, either by selling the home after it’s repaired or renting it out. That amount will also need to be subtracted from the amount investors might be willing to bid. In short, you may overbid if you don’t understand how investors bid on auction properties. How Can I Finance The Purchase Of A Home At Auction? Even though auctions require cash, there are loans available that might help first-time investment buyers. Hard Cash Loans These are loans that are high interest and short term, and generally unsuitable for auction bidders who plan to live in the home. These loans make sense for property flippers, whose business it is to fix up and sell their auction buys as quickly as
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