What Auction.com and Hubzu are
Auction.com and Hubzu are online marketplaces where banks, servicers, government agencies and some private sellers sell real estate by auction. The inventory is mostly bank-owned property after a foreclosure, short sales and, on Auction.com, live trustee’s sales streamed online. A buyer registers, places a deposit or authorises a hold, bids during a set window, and, if the bid is the highest and meets the seller’s reserve, signs a purchase contract and closes within the period the contract sets, usually a few weeks.
Two features distinguish these sales from the courthouse steps. First, there is a contract and a closing period, so a loan can be arranged and funded inside it. Second, the sales are as-is with few or no contingencies, a buyer’s premium is added to the winning bid, and the earnest money deposit is due within a day or two of winning and is at risk if the buyer fails to close. The combination rewards an investor who bids with the financing already approved and punishes one who bids first and looks for a loan afterwards.
Buying with hard money
The bank’s calendar does not fit an online auction. A conventional lender needs the property to appraise and to be habitable, needs weeks of underwriting on the borrower, and reserves the right to decline at the end; an as-is contract with a hard deposit and a short close cannot carry that risk. A hard money loan is underwritten on the property, the equity and the exit, which is why it fits: the decision comes in days, the property can be in any condition the plan accounts for, and the close matches the contract.
The sequence is the same as for any cash-only purchase. Get the approval before the bid, with the property, the maximum price and the plan sent to Loan Goat in advance. Bid with the approval in hand and the deposit ready. After the win, the file moves in parallel: the contract, the application and the schedule of real estate owned, proof of funds for the down payment, the buyer’s premium and closing costs, title and escrow, and the valuation where one is required. The Letter of Intent fixes the terms and the loan funds inside the contract period. Loan Goat’s standard process runs 5-7 days from a complete file, and the hard money residential bridge publishes a close in as quickly as 3 days.
Programs
Bridge
For a habitable property that will be held for a short period, resold without heavy work or refinanced later. The bridge loan publishes terms of one or two years, LTV up to 75%, loans from $150,000 to $25,000,000, rates from 9.00% to 13.00%, a 650 minimum credit score, no borrower experience required and no prepayment penalties, on SFR, condo or townhome and 2-4 unit property. The hard money residential bridge sits on the same terms for the property or the borrower with a story, and above the 650 floor a credit event is weighed against the equity rather than ruled out.
Fix and flip
For the auction property that needs work, which is most of them. The fix and flip loan publishes terms of 6 to 18 months, up to 85% of the purchase, 100% of the rehab and 75% of ARV, loans from $250,000 to $10,000,000 and rates from 9.99% to 12.00%, with a 620 minimum FICO, first time flippers allowed, the rehab held back and released through draws, non-Dutch interest calculated on the drawn balance, and an interest reserve available.
Rental: DSCR
For the property that will be rented, either from the start or after a bridge. The rental DSCR loan qualifies on the property’s rent rather than the borrower’s income: 5, 7, 30 and 40 year fixed terms, LTV up to 80% and rates from 6.50% on the Non-QM tier, a 620 minimum credit score, first time investor OK, DTI not calculated and recently listed properties OK. A conforming loan or a bank portfolio loan is the alternative when the property and the borrower qualify and the contract period allows it.
Cross-collateral
When the purchase is larger than the cash on hand, equity in another property the investor owns can be pledged alongside the auction property. Cross collateralization is the published structure of the blanket and cross-collateral loans program, at rates from 8.99% to 12.00% on a first lien.
Owner-occupied
A buyer who intends to live in the property is asking for a consumer purpose loan, which follows consumer rules and timelines and is a different loan from the investor programs above. Loan Goat’s owner occupied loans program covers its VA home loans; whether an owner-occupied auction purchase fits a program is confirmed per file.
Requirements
- Before the bid. Registration with the auction site, the deposit or card hold, proof of funds, and a lender approval based on the property, the maximum price and the plan.
- After the win. The signed contract, the earnest money deposit, the application and the schedule of real estate owned, proof of funds for the equity, the premium and closing costs, and the exit plan.
- On the property. Title and escrow opened immediately, an exterior review and a repair budget where the interior was not available, and a valuation where the program requires one.
- On the borrower. A credit score above the program floor (650 on the bridge, 620 on fix and flip, 620 on the Non-QM DSCR loan) and the liquidity the deal needs.
Where online auction purchases fit
- Fix and flip loans for the renovation most auction properties need.
- Bridge loans for the fast, as-is close.
- Land for the lots and parcels that appear on the same platforms.
- Foreclosure auction for the courthouse-steps version, where payment is due on the day.
Online auctions turned a courthouse ritual into a marketplace with a contract and a calendar, and a hard money loan is the financing built for that calendar. Get approved before the bid, and the win is a closing, not a scramble.
