A couple weeks ago, a few of us attended a live auction on a six family apartment building in Dorchester. The property was initially listed on the MLS as an auction, but was ultimately removed, due to what we assumed was demand in registering for the event. A few days before the auction, those of us who were attending, got together to talk about the property and analyze some of the numbers including after repair value, rehab budget, etc. We ultimately decided on an ARV of 1.4 million (this number will come back later) as we started looking ahead to the auction date.
On the day of the auction, during the drive over, we tried to get a feel for how many people might show up to the event. Thinking negatively, I assumed maybe a dozen or so people would show up to compete for the property. We arrived pretty early and therefore, were one of the first people there. As time went on, however, people started arriving, flooding the street with cars and people standing around waiting for the start time. By the time 11:00 rolled around, the time the auction was suppose to start, nearly 50 people had registered as bidders! I think at that point we were more just looking to have a good time and see what the property ultimately sold for.
Funny enough, once the auction started, we were actually the first bid to come in at 600,000, which was the opening bid. Our chances lasted about all of a minute. Within that time the bid had increased to well over 800,000, which priced us out of our max allowable offer. As the price continued to climb, we couldn’t help but chuckle and not understand what was happening since we believed the property to only make sense at a certain value. After about 15 minutes of back and forth bidding between two people, the property finally sold for 1.4 million. Yes, the amount that we determined the property was worth BEFORE the $500,000 in repairs we estimated the property needed!
At the end of the day, we definitely enjoyed the experience and chalked it up to a good learning experience. There will always be more deals to be had, you just have to keep looking for them. Since then, we have made a commitment to attending more auctions to get a sense of whether it is a worthwhile pursuit for deals or not.
Below is a short video of a portion of the bidding process. If you can tell, we were having some fun at this point in the background.