$8,000 lesson.

Those damned late night infomercials..... They lead perfectly intelligent people to believe that with no money down or for a few thousand dollars, they can buy homes of people who defaulted on their mortgage payments.

I had a prospect who saw a late night infomercial from a "national figure", called up the number and got talked into signing up for a "coaching program" for some $8,000 which would reveal the secrets of buying real estate with no money down. Turned out they were talking about some variation of buying foreclosed properties at a trustee's sale (auction). This "coach" suggested financing the purchase by using credit card debt!

Before you get glossy eyed about the prospects of all of the money you will make by buying properties at these auctions, let me inform you about a couple of things you may not know.

1. Most of the time, you are bidding on a house you have never seen on the inside to determine its condition. Remember, people who are going through the emotional turmoil of having their house taken away will not be too keen on letting people in to see the house. You don't know how much damage you will find inside. (Remember some of those houses on Flip This House?) When you factor in the repair costs, the house you are trying to buy may be no bargain.
2. You are buying the property at the auction site with all cash (cashier's checks). Most lenders will not lend you money to engage in this risky endeavor, so you must either have hundreds of thousands of dollars at your disposal, or should have a syndicate with the necessary money to take on the project.

When you bid for properties at the footsteps of the County Court House (yes, at the footsteps, not even inside), you are competing with people who have done this many time and know what they are doing and have a team assembled to get the project completed on time. I doubt they have just completed their exercises with their "coach" and are there with their credit cards trying to purchase a house.

With so many shows on TV about flipping houses, don't you find it odd they don't show you how they buy the house before they start working on it? It's not fun, nor entertaining.

Folks, you all know this. Say it with me: IF IT SOUNDS TOO GROOD TO BE TRUE, THEN IT PROBABLY IS. Let me save you $8,000 and a lot of heart ache: you can't buy a house at a trustee's auction with a credit card. These "national figures" will not refund your money, so keep it in your pocket in the first place. Spend it elsewhere, wisely.

Steve Mun, Silicon Valley Realtor
http://www.stevemun.com/