Due Diligence

Today I had a new experience in my real estate investing… it came down to just hours before closing that I discovered some underlying issues with a property I won at auction 2 weeks ago. Here’s the story…

The Setting

I attended my first property auction on October 29th, 2013 – I was excited and nervous. The seller auctioning off the properties was a familiar one and I had purchased two properties from them already through the MLS. So I couldn’t wait to see what kind of deal I could get since they had been sitting on around 200 properties for a year without being able to sell them on the MLS.

The Deal

There were three properties I had interest in. I only won one of them, but it was also the least expensive property. It was advertised as a 2 bed, 1 bath property that had a non-paying tenant/squatter and no lease. I thought no biggie, I’ll offer cash for keys and hopefully get him out without anymore damage to the property. I signed the papers with the understanding I will be receiving a covenant deed and marketable title, taxes, water, and any other outstanding fees paid.

The Research

I was able to contact the tenant by leaving a card on the door as well as talking to one of the neighbors. I set it up for the city to fix the water meter to get a final read before closing after discovering the meter wasn’t functioning. I set the stage to work out a deal with the tenant/squatter after closing.

I verified all the normal things you should when buying a property such as true ownership, property history, taxes, and so forth. The seller was paying the taxes, back water, ordinance tickets/violations …read more