Real Talk Real Estate with David Greene
Episode 37: Lessons From Auction Mistakes with Tommy Loretz
Release Date: February 13, 2025

Introduction

In Episode 37 of Real Talk Real Estate, host David Greene welcomes Tommy Loretz, a licensed broker from California, to discuss his experiences and lessons learned from purchasing properties at foreclosure and tax sale auctions. This episode delves into the complexities and potential pitfalls of auction-based real estate investments, providing listeners with invaluable insights to navigate similar challenges.

Tommy's Initial Auction Mistake

Tommy begins by recounting his most surprising and disappointing purchase: a single-family home in Cleveland, Ohio. Through remote research, he believed he was acquiring two parcels, including a garage and a yard, for a minimal bid of $6,500. However, he later discovered that the property consisted of three parcels. While he secured two—the garage and yard—the main house on the third parcel was purchased by another bidder.

Tommy Lorettes [02:57]: "The actual home, the actual Structure was on the third parcel that I did not purchase and someone else had purchased that. So I more or less ended up with nothing at that point, or nothing worthwhile at that point."

This misstep left Tommy holding the garage with no practical use, as the main residence was elsewhere, effectively nullifying his investment.

Detailed Breakdown of the Five Bad Deals

Expanding on his challenges, Tommy discusses five additional properties he acquired, each presenting unique issues:

1. Foreclosure Redemption:
   One property was subject to foreclosure redemption, allowing the previous owner to reclaim ownership by settling outstanding debts. Tommy had to wait two months to retrieve his $25,000 bid after the redemption was exercised.

2. Flooded Basement:
   Shortly after purchasing another property, Tommy received a call about a burst pipe causing extensive flooding. He managed to mitigate some damage but faced a potential $7,000 loss.

3. Squatters and Eviction Complications:
   A third property had squatters, leading to a botched eviction process by Tommy's team. The delayed eviction resulted in a $16,000 loss.

4. Torn-Down Property:
   Perhaps the most alarming was a property Tommy bought for $12,000, only to discover the city had demolished the building months prior. All available information platforms still listed photos of the now non-existent structure.

5. Successful Flip:
   Out of the five, only one property met his expectations, albeit requiring significant rehabilitation.

Tommy Lorettes [05:37]: "So I more or less ended up with nothing at that point, or nothing worthwhile at that point."

Tommy Lorettes [26:25]: "No one's really talking to each other and explaining what happened."

These experiences highlight the unpredictable nature of auction purchases and the critical importance of thorough due diligence.

David's Auction Story

David Greene shares a personal anecdote from his first county auction in Oklahoma. He describes a chaotic scene where bidding wars and aggressive behavior were the norms. During the event, David inadvertently became the center of attention when a fellow bidder recognized him, preventing what could have been an embarrassing confrontation.

David Green [15:33]: "I didn't know what I'm like. I thought I was going to have to fight this Guy now..."

This story underscores the high-stakes environment of auctions and the unexpected interactions that can occur.

The Auction Process and Its Challenges

The conversation shifts to the intricacies of the auction process. Tommy explains that the information provided is often laden with legal jargon and incomplete data, making it difficult to assess the true value and condition of properties without on-the-ground inspections.

Tommy Lorettes [26:48]: "They're pretty much all the information you're getting from that is in legal jargon. So a lot of it is not very straightforward, can be confusing."

David draws parallels to navigating complex systems, likening the experience to "the matrix," where understanding comes with experience and familiarity.

David Green [11:52]: "To me, it was like when I first saw this, that I was Neo in the matrix and I'm looking at all the code..."

Adjustments in Approach Following Mistakes

In response to his earlier challenges, Tommy has refined his auction strategy. He now collaborates with local inspection companies to conduct drive-by assessments of properties before bidding. While legal restrictions prohibit entry onto auctioned properties, these inspections provide a clearer picture of potential rehabilitation costs and structural integrity.

Tommy Lorettes [33:25]: "The biggest change that I'm doing is I have worked with a local inspection company..."

This proactive approach aims to mitigate unforeseen issues and enhance the accuracy of his investment assessments.

Advice for Newcomers

When asked for advice, Tommy emphasizes the importance of starting small and learning from early mistakes. He cautions against investing large sums initially and advocates for spreading investments to manage risk effectively.

Tommy Lorettes [36:06]: "Start off small. There's a lot that can go wrong... don't bet all your money on this taking you out of your job off one deal."

David echoes this sentiment, highlighting the value of embracing and learning from errors to build confidence and expertise without succumbing to analysis paralysis.

David Green [36:41]: "If people can embrace that, they will have the confidence to move forward..."

Conclusion

Episode 37 of Real Talk Real Estate offers a candid exploration of the challenges inherent in foreclosure and tax sale auctions. Through Tommy Loretz's experiences, listeners gain a realistic understanding of the potential pitfalls and the strategies necessary to navigate them successfully. David Greene's engaging narrative and actionable advice make this episode a must-listen for aspiring real estate investors seeking to delve into the auction market.

Notable Quotes

• Tommy Lorettes [02:57]: "The actual home, the actual Structure was on the third parcel that I did not purchase and someone else had purchased that."

• David Green [15:33]: "I didn't know what I'm like. I thought I was going to have to fight this Guy now..."

• Tommy Lorettes [26:48]: "They're pretty much all the information you're getting from that is in legal jargon. So a lot of it is not very straightforward, can be confusing."

• Tommy Lorettes [36:06]: "Start off small. There's a lot that can go wrong... don't bet all your money on this taking you out of your job off one deal."

• David Green [36:41]: "If people can embrace that, they will have the confidence to move forward..."

Connect with Tommy Loretz

For those interested in reaching out to Tommy Loretz for further insights or collaboration:

• Email: justtlorettzmail.com

Tune in to Real Talk Real Estate with David Greene for more unfiltered stories, insider details, and expert insights to elevate your real estate endeavors.