Experienced auction buyers expect to buy more this year, but at lower prices.
Meanwhile auction sellers are expecting more foreclosures with less equity.
Despite the tariff-triggered uncertainty hovering over the economy in recent months — or possibly because of it — experienced buyers of distressed properties at auction have remained remarkably optimistic about their property acquisition prospects in 2025.
Meanwhile, auction sellers are expecting both foreclosure starts and completed foreclosure auctions to increase in 2025, providing the local community developers who buy at auction with more inventory to choose from and possibly more leverage on pricing.
More distress, better deals
“I am anticipating more distressed properties will be coming available, and I’m looking for better deals since rehab costs are increasing,” wrote Auction.com buyer Rebecca Sequeira in response to an April buyer sentiment survey. Sequeira, whose company Arnell Homes purchases distressed properties in the Cincinnati, Ohio, area, is also treasurer of the Real Estate Investor’s Association of Greater Cincinnati. She said market conditions have not affected her willingness to buy.
Buyers like Sequeira seem to be taking Warren Buffet’s famous advice seriously: to be fearful when others are greedy, and to be greedy when others are fearful.
Nearly two-thirds (64 percent) of Auction.com buyers surveyed in February said they expect their property acquisitions in 2025 to increase, up from 60 percent of those surveyed at the beginning of 2024 and up from 54 percent of those surveyed at the beginning of 2023.
Another 30 percent of buyers surveyed said they expect their 2025 property purchases to remain about the same as in 2024, while only 6 percent said they expect property purchases to decrease.
Buyers describing themselves as local community developers were the most optimistic among buyer types, with 95 percent expecting purchases to increase or remain the same – compared to 93 percent of owner-occupant buyers and 92 percent of institutional investors.
Success with distress
Local community developers comprise the majority of buyers purchasing distressed properties at auction: 63 percent of Auction.com buyers surveyed described themselves as local community developers compared to 26 percent as owner-occupant buyers and just 4 percent as institutional investors.
Many of these local community developers have been purchasing and renovating distressed properties for years, if not decades, and know how to succeed in a variety of market conditions.
“We buy houses that are often in bad shape, repair and renovate them and sell them to owner-occupants who benefit from good houses without problems to fix,” wrote Daniela Bandas, a survey respondent from Illinois who described herself as a local community developer and said she plans to increase her property acquisitions in 2025.
Tariff-triggered trepidation
That’s not to say that market conditions aren’t impacting the buying sentiment of local community developers.
In a quarterly buyer sentiment survey conducted in the second week of April — soon after the shock of the so-called Liberation Day tariff announcements — 38 percent of Auction.com buyers said the current market environment was making them less willing to buy, up from 34 percent in a January survey. Meanwhile, 22 percent said market conditions were making them more willing to buy, down from 24 percent the January survey.
Despite the waning sentiment, 78 percent of buyers surveyed in April said they planned to buy the same number or more properties in the next three months as they had in the previous three months. That was down from 86 percent in the January survey but still more than three-fourths of all respondents.
Sentiment not changing strategy
Furthermore, 42 percent of buyers said market activity over the past 90 days had not changed their bidding strategy, up from 36 percent who said that in January.
“I won’t be changing my strategy much since I just made major changes to our underwriting early this year,” said Paul Lizell, a Florida-based Auction.com buyer who buys across the country and also trains other investors to buy at auction through his YouTube channel, The Virtual Investor.
Lizell’s bidding strategy changes included lowering his maximum allowable offer calculation by 5 points and more than doubling his estimated property hold time from four months to nine months.
“Since we made these changes, our profits are way up,” Lizell continued. “We were losing money on some deals and needed to stop the bleeding. The tariffs shouldn’t have too many effects except for a possible increase in material costs.”
Proactive bidding adjustments
Bidding behavior data on Auction.com indicates that many other local community developer buyers like Lizell had already adjusted their bidding strategies in late 2024 in anticipation of a retail housing slowdown in early 2025.
After peaking at a nearly three-year high in May 2024, the foreclosure auction sales rate on Auction.com steadily declined through November, and has largely leveled off since then — save for a two-month spike in December and January that may be a post-election bump in certainty that soon evaporated as tariff talks ramped up. This sales rate is a key auction demand metric, indicating how much volume buyers are willing to purchase at the available price points.
There are substantial regional differences in the sales rate metric. In the first quarter of 2025, the sales rate increased in half of 76 major markets analyzed by Auction.com, including New York, Philadelphia, Detroit, Washington, D.C., and Minneapolis. The markets with increasing sales rates correspond with many of the areas where Lizell said he is purchasing in 2025.
“We are trying to focus on markets with low inventory and avoid high inventory areas so our holding time is less,” he said.
Pricing pressure on sellers
And while auction sellers as a group held pricing relatively steady in the second half of 2024, and even increased pricing in early 2025, the price auction buyers are willing to pay declined in five of the six months between May 2024 and October 2024 before rebounding somewhat late last year and early this year. That combination has widened the bid-ask spread between what buyers are willing to pay and what sellers accept at foreclosure auction.
Combined with an expected rise in foreclosure auction inventory, the widening bid-ask spread could persuade sellers to lower pricing at foreclosure auction. In an April survey of Auction.com sellers, 60 percent said they expect foreclosure starts to increase between 1 percent and 4 percent in 2025 while 67 percent said they expect completed foreclosure auctions to increase similarly.
According to the same seller survey, the seriously delinquent (SDQ) pool those foreclosures will be drawn from is comprised of properties with shrinking equity, indicating more of them will roll from foreclosure start to completed foreclosure. Survey respondents estimated the average loan-to-value ratio of their SDQ inventory at 82 percent, down from 65 percent in an Auction.com seller survey a year ago.
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