As a long-time local real estate investor, I’ve been to my fair share of Music City real estate auctions over the years. So, it wasn’t surprising when my friend Sam started in on the questions about them when we met for lunch at The Stillery a few months back. He wanted to begin investing in distressed properties, like me, and thought they were the best place to buy from.
Having been down this road in the past, I was solidly in the “not a fan” camp. But, Sam seemed to be in love with the idea. He figured he could check out the local websites to find an auction, show up with cash in hand, and walk away with a house in a hot Nashville neighborhood all in one day.
If only it were that easy.
That’s why I bought him another cocktail, set him straight about all the pros and cons of Nashville, TN real estate auctions—then, told him about a better way to find distressed investment properties.
Pros and Cons of Real Estate Auctions in Nashville, TN
Like Sam, you might be drawn to auctions because you think it’s an easy way to find a good deal on a distressed property. You can conduct research on the property ahead of the auction, do a drive-by of the home, and maybe even get a feel for what it could go for after the rehab. But, do these benefits outweigh some of the negatives in most cases?
Let’s take a look at your options at a few auction houses that serve Nashville.
Serving the entire state of Tennessee, including Nashville, Parks Auction is run by a team of experienced real estate professionals. The company has been auctioning off properties for 30 years and really tries to cater to real estate investors just starting out, welcoming anyone to attend the auctions without having to bid. That means you can go see for yourself how things are run before putting any money on the table.
While Parks Auction makes it easy to watch, learn, and bid, it’s also easy to get caught up in the excitement. Their website promises you won’t accidentally buy a house by scratching your nose, but it makes no guarantees that you won’t get carried away and make a higher bid than you’ll be able to profit from.
Parks even offers online bidding in some auctions, which sounds like a great idea until you remember how easy it is to run up your credit card on Amazon. The due diligence at live auctions is even more necessary for online auctions—you don’t want to buy a house based on pictures you’ve seen posted to a website.
Bill Colson Auction & Realty
In the business for more than forty years, Bill Colson Auction & Realty auctions everything from residential real estate to automobiles. This level of experience promises a smooth, fair sale that’s welcoming to beginners. You’ll need to have money in hand or financing in place before the sale. The winning bidder also has to pay 15% earnest money that’s non-refundable immediately after the sale. However, you’ll have two weeks to 30 days to pay the balance at closing, giving you some time to finalize funding arrangements.
The big problem with Bill Colson Auction & Realty is the limited number of auctions. Only one or two properties are sold per month, typically but not entirely court sales. With such a limited inventory, auctions like Bill Colson’s can’t be your only source to find distressed properties if you want to build an active real estate investment business.
There are a few other issues as well. Inspections are normally only allowed on the day of the auction, leaving little time for due diligence. Their website posts some listings, but information is limited. While a section for online auctions exists on the website, it’s empty. Also, two of their four testimonials feature the same picture with different names, giving the appearance of having been written by the same person, which has the opposite of its intended effect. It fails to inspire trust.
Agee & Johnson Realty & Auction
What sets Agee & Johnson Realty & Auction apart from its peers is its ability to cater to all types of real estate investors. From the first-time real estate buyer to one who has been around the block, Agee & Johnson has properties that meet everyone’s needs, from small, simple projects to larger, more expensive properties with higher upsides. Adjacent properties are often listed providing opportunities to investors seeking multiple simultaneous investments.
While Agee & Johnson posts the terms of sale—typically 20% of the bid prices—they don’t tell you what minimum bid to expect or what it takes to qualify to make a bid in the first place. You also won’t know who you are bidding against. Also, houses are sold as-is and often come from estate sales. While this can be a boon for the lucky investor who finds an antique piano in the living room, it can also pose removal problems if the furniture is undesirable, adding to the costs of renovation.
Auction houses provide a service to investors seeking to get into the market, or to continue their business with a small number of ongoing projects. There’s no upfront cost or marketing required to buy a house at auction, lowering the bar to entry. At the same time, the low volume of properties and competitive bidding process preclude investors from using auctions to scale up their real estate business to full time. That takes a steady stream of properties you can buy, which you won’t find at a real estate auction in Nashville, TN.
A Better Way to Find Investment Properties in Nashville, TN
To be fair, and this is what I said to Sam, you can find an investment property at an auction. But it takes a lot of work, a lot of time, and there’s no guarantee you’ll be able to flip it for decent returns. It can be a good way to dip your toes into real estate, but the only people making full-time money from auctions are the auction companies.
There’s a more reliable way, and I encouraged Sam to look into it when he was ready—maybe after he’d tried an auction or two. It’s to become an independently owned and operated HomeVestorsⓇ franchisee. They’re the company responsible for the nationally-known and trusted “We Buy Ugly Houses®” marketing campaign—if you haven’t heard it on the radio or TV, you’ve probably seen a billboard.
Having access to the marketing power of such a nationally recognized brand helps me find far more qualified leads than I was ever able to at real estate auctions. When a homeowner faces distress, or a family member has to manage an estate sale, they’ll often call me before they call the auction company. I make them a fair, cash offer, and they don’t have to worry about the uncertainty that comes from the auction block. I get leads; they get to sell their property for a reasonable price. It’s a win-win.
To find out more about how you can stop searching out auctions and start getting qualified leads, request information from HomeVestors® today!
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