buy a house at auction without cash

As real estate investors, we all love a good deal.  Properties sold at auction can be great bargains because they’re oftentimes not on MLS, so you’re likely facing less competition.  

I’ll tell you a quick story

I was trying to work a deal on a 4 bedroom/2 bath ranch a few years ago.  The buyer and I went back and forth and just couldn’t come to an agreement.  My final offer was $33,000. I was really hoping the deal would work out, but, in the end, it fell through.

Well, sometime later, lo and behold, I saw this very property pop-up on Wouldn’t you know it, I was the winning bid, and I acquired the property for $17,500! I’m glad that first deal didn’t work out after all.

Now, at the time, I had cash to pay for the property, but the reality is most investors, especially when first starting out, don’t have liquid cash to just go out and buy properties at auction, so is it possible to buy a house at auction without cash?  Let’s find out.

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Understanding the different types of auctions

There are two different types of real estate auctions: live (in person) auctions and online auctions.  Live auctions are the ones that typically take place at the courthouse steps although they can take place at any public location and sometimes are even handled at the property being auctioned.  

Online auctions are just that – real estate auctions that are handled online.  While there are a number of sites that handle online auctions, I believe is the most well-known.  

The main difference between live auctions and online auctions is the duration of the auction. Where live auctions may span a few hours, online auctions typically last for days on end.

A common misconception is that all properties sold at auction are foreclosures (trustee sales). While this is often the case, it’s not always the case. Sometimes the seller just wants a quick sale.  Other times the property is being sold as a short sale meaning the seller is facing foreclosure, and to prevent foreclosure, the bank is allowing the seller to sell the property for less than what’s owed.  So, it’s somewhat of a mixed bag.

Can you buy a house at auction without cash?

Some sellers will accept financing; others will only accept cash offers.  The biggest issue with financing an auctioned property is that the closing window required often doesn’t give the bank enough time to do what they to do to close.  Furthermore, banks don’t usually finance properties in poor condition which is typical among auctioned properties.

An alternative to bank financing is to get hard money or private money which you can pay off with long-term financing through a bank sometime after the deal is done and you’ve had a chance to rehab the property to the bank’s liking.  

Another option is to get large personal loans or lines of credit on your own.  Check out my post on investment property loans for more details on where to acquire different financing options for real estate investors.

Final thoughts

You can buy a house at auction without cash using bank financing, hard/private money, personal loans/lines or a combination of these.  While not all properties sold at auction are in foreclosure or facing foreclosure, many are. As a next step, I recommend checking out my posts on foreclosures and investment property loans.

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