A foreclosure twist on this technique is to purchase the property in default and lease it back to the owner. You also give them an option to purchase the property at some point in the future at some agreed-upon price. If the loan has a due-on-sale clause, you should discuss it with the lender. Keep in mind that most lenders do not want more property in their REO portfolio and will probably not call the loan.

The agreed-upon future price should include any cash you put into the property to reinstate the loan plus any negative cash flow (if applicable) and an acceptable return on your investment. As with the equity-sharing arrangement, consult with your attorney for assistance in structuring the transaction.

At the Sale

Georgetown, Texas

We conclude this chapter with one of our experiences at a real estate auction in Georgetown,Texas. While this was not a foreclosure sale, we present it here as an example of how to bid and when to bid.

We were in Georgetown doing a marketing promotion and were doing some sightseeing. We drove past an old Victorian home with signs in the front yard announcing an estate sale for the weekend. We stopped to look and discovered two things.

An estate auctioneer had rented the vacant property and brought their inventory of estate-sale items to this property. The auctioneer wanted the ambiance of the property to create an atmosphere for the estate sale. We actually thought this was a very smart marketing ploy.

We also discovered that on Sunday afternoon at the conclusion of the estate sale auction, the auctioneer was going to hold an auction for the property. This was now becoming very exciting!

We toured the house and grounds and decided to participate in the property auction. We had determined that the property needed about $150,000 in renovations. Once the work was completed, we felt the property would sell in the $450,000 to $600,000 range.

The Auction The auction was conducted in the back yard under a canopy. We registered for the auction and got our bidding number. There were 30 to 40 people sitting in chairs at the back of the auction area. We walked in and sat down toward the front so we would have an unobstructed view of the auctioneer.

The auctioneer made an announcement that there would be a bidder making bids over the phone to one of the members of the auctioneers staff. The auctioneer then began the auction by asking for an opening bid of $400,000.When no one would bite, the auctioneer asked the bidders to make an opening bid.

The first bid was for $50,000. The second bid was for $100,000. The third bid was for $150,000. We were watching and listening and waiting. Finally there were only two bidders bidding;the bidder on the phone and one of the bidders on site. They were bidding back and forth in $5,000 increments.

The bidder on the phone bid $195,000. The auctioneer asked for a $200,000 bid. The bidder on site said nothing. The auctioneer announced $195,000 going once. $195,000 going twice. That is when Bill raised his bid card from his lap and held it in front of him.

The auctioneer pointed at Bill and said, $200,000. Our bid was relayed to the phone bidder. You could tell the phone bidder was stunned by our bid from the reaction of the auctioneers staff person. Finally, they came back with a bid of $205,000. We immediately bid $210,000.

This was going to be our final bid no matter what. We had determined that we would bid no more than $210,000 before the auction started. The auctioneer asked for a $215,000 bid. None was forthcoming. The auctioneer announced $210,000 going once. $210,000 going twice. $210,000 going three times. Sold, for $210,000.

We had won the bid. We were very happy. People came up and congratulated us. What we want you to learn is our technique for bidding. We made sure we were well situated to be seen by the auctioneer. We didnt bid until the end of the bidding process. We knew what our top bid was going to be. We didnt go over our predetermined top bid.

In the next chapter we will show you the four time periods or phases in the foreclosure process to buy foreclosures. Phase 1 is a pre-foreclosure time period before the notice of default is posted. Phase 2 is still a pre-foreclosure time period after the notice of default is posted and before the foreclosure sale occurs. Phase 3 is at the foreclosure sale. Phase 4 is after the foreclosure sale.

Our recommendation is that you buy foreclosures before the foreclosure sale. It may not be as exciting as buying at the foreclosure auction. But you will have far less competition! And you will have an opportunity to make Quick Cash.