Reason You Gotta Be Really Careful With Auctions: The Hidden Challenges Most Investors Fall For

By Jorge Vazquez

After doing this for over 20 years, managing hundreds of deals and talking to thousands of investors, I’ve seen every “too good to be true” story out there. But this one? It still hits hard. I had a recent phone call with a new investor—we’ll call him Mike—that perfectly shows why auction properties are not the playground for beginners.

Let me tell you the story…

The Dream: A “Great Deal” in Pasco County

Mike was excited. He jumped into the auction scene headfirst—like many do—hoping to score a big win in the hot Florida market. He bid on what he thought was a distressed property due to a lien from an unfinished pool job. The owner had passed away midway through construction, and a pool company pushed it into foreclosure.

Mike saw it as a golden opportunity: fix the place, maybe rent it, and come out ahead. He paid roughly $73,000 to settle the lien, and after some cleanup, attorney fees, and maintenance, he had $150,000 tied up.

The kicker?

That pool lien wasn’t the only thing lurking beneath the surface…

The Nightmare: A Hidden $430,000 Mortgage

Mike found out the hard way that a $430,000 mortgage was still attached to the property. That’s right. He “won” the auction but didn’t realize the property was still under the original bank’s mortgage. Even worse, no one at the auction told him.

And this happens a lot more than you’d think.

Mike couldn’t get the bank on the phone. The attorney wouldn’t talk. He was stuck with a property he didn’t own free and clear—and now the bank is foreclosing on it.

The Math: When Bad News Keeps Getting Worse

Let’s break this down like I did for Mike:

• He paid $73,000 to settle the lien.

• He spent ~$75,000 more on attorney fees, utilities, and clean-up.

• The property is appraised at $466,000.

• The mortgage payoff is around $430,000, including $90K in back interest and another $90K in fees and taxes.

• He’s now nearly $300,000 deep into this mess just to break even.

• Oh, and there’s a half-dug hole in the backyard where the pool was supposed to be. (Yes, an actual hole.)

The Options: What I Told Him

I laid it all out straight for him—no sugarcoating:

🛑 Option 1: Try to Modify the Loan

Talk to the bank. Beg. Plead. Show that you’re a victim of bad timing and worse due diligence. Maybe—maybe—they’ll work with you. You’ll still have to cough up $180,000 just to reinstate the loan, but at least then you’ll own the debt with a 2.375% interest rate, which is rare and sweet in today’s market.

If you rent it long-term, you could cash flow about $1,000/month. That’s a 4% return on your investment. Not amazing—but better than losing it all.

🛠 Option 2: Go Short-Term Rental (Airbnb/VRBO)

If the area allows it, this could be the saving grace. Clean it up, bury the pool hole for about $10K, and furnish the home later only if there’s demand.

Use virtual staging first—put it on Airbnb and VRBO with a 60-90 day lead time and minimum 1-3 month stays. That way, you test the market before spending more. If you’re pulling in $6,000/month, suddenly you’re making a 24% return, which makes the whole situation way more palatable.

🧨 Option 3: Delay, Delay, Delay

This one isn’t for the faint of heart. You fight the foreclosure. Rent it while you delay. Save every penny of rental income for 1–2 years, and by the time the court date hits, you’ve got some of your investment back.

There are lawyers who can help you navigate this without paying $35,000 retainer fees. One of my guys could help—no nonsense, just the face for your effort. But you’d still be doing most of the work.

The Lesson: Why You Gotta Be Extra Cautious With Auctions

This is why I never buy from auctions.

Every property has a backstory—and in auctions, you’re bidding blindfolded.

Mike didn’t know he was buying a property with a full mortgage on it. And that pool? Just added insult to injury. Even the attorneys didn’t want to deal with it. And let me tell you: if attorneys are telling you “yeah, good luck,” you’re in deep waters.

What You Should Do Instead

If you’re a beginner, don’t go playing poker at the high-stakes table. You’re not going to outbid seasoned hedge funds, and you don’t want to learn these lessons the $150K way.

Instead, here’s what I teach my students at Property Profit Academy:

• Buy with eyes wide open. Always get a title search.

• Don’t trust the “deal” without knowing the full debt story.

• Stick to off-market or agent-negotiated deals where we can do proper inspections, title work, and even negotiate repairs.

Real estate is a game of strategy—not chance.

Final Words to All Investors

You might think you’re saving money by skipping inspections or doing your own research—but in real estate, what you don’t know can absolutely bankrupt you.

Mike’s story is a cautionary tale. The $430K mortgage wasn’t in the auction details. The bank didn’t notify him. Nobody held his hand. And now he’s left figuring it out on his own.

You don’t want to be that guy.

Disclosure:

This article is based on a real phone conversation with an investor. For privacy purposes, names and identifying details have been changed. The opinions and advice provided here reflect the author’s professional experience but are not a substitute for legal or financial counsel. Please always consult with professionals before making investment decisions.

Closing Signature:

Keep it consistent, stay patient, stay true—if I did it, so can you!

Ready to connect and strategize? Contact me at graystoneig.com/ceo – Jorge Vazquez, CEO of Graystone Investment Group & its subsidiary companies and Coach at Property Profit Academy.

PART 2: So How Do You Actually Protect Yourself?

After I shared Mike’s story, someone asked a great question:

“Jorge, how do you even do a title search before an auction?”

Let me break it down for you.

When it comes to auctions, I always say this: you can’t fish with one worm.

If you go chasing just one property and spend all your time on it, you’re setting yourself up for failure. These auctions are a numbers game, not an emotional journey. So what do smart investors do? They cast a net.

Here’s how it works:

You identify 10 to 20 properties that look promising. You don’t fall in love with any of them — not yet. You reach out to your title company and say, “Hey, I’ve got a batch of auction deals I’m evaluating. Can we run some quick preliminary title searches?”

Now, if you bring them one deal, they’ll charge full freight — and to be honest, they won’t be in a rush. But if you bring them a batch, you can negotiate a discount and make it worth their time. You’re not just playing the game anymore — you’re running the table.

And here’s the golden rule:

Always spend the money on a title search.

Because spending a few hundred bucks upfront is way better than inheriting a $400,000 disaster, like Mike did.

Now let me be real — if you’re only going after one property at a time, auctions are probably not for you. The odds are stacked, the competition is high, and the risks are even higher. It’s like walking into a casino with your entire life savings. One wrong move… and you’re done.

The real investors who succeed at auctions?

They treat it like a full-time job. They move fast, use systems, and never get emotional. They’re running title searches in bulk, walking properties when they can, and already have exit plans lined up.

So my advice?

If you’re new, don’t do auctions unless you’re prepared to go all in the right way.

No shortcuts. No guessing. No emotions.

And if you’re serious about learning how to do it right, I’ll teach you everything at Property Profit Academy. From sourcing deals to structuring offers to doing bulk title work the smart way — we cover it all.

Because the last thing I want is for you to be the next Mike.

Meet our Team of Experts!

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With 25+ years in hospitality and a background as a U.S. Army vet, Jay brings discipline and care to every rental. He’s the guy behind smooth operations and happy landlords. Connect with Jay: https://graystoneig.com/jay

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