We have all heard the stories of that person that purchased their beautiful home for next to nothing because it was at foreclosure auction. Purchasing a home at a foreclosure auction can be a smart way to purchase a house that you might not have been able to afford otherwise. To do so you need to understand the process of purchasing a foreclosure at auction.
Know the Rules
Each state is different so you will need to do your research to find out the rules for buying at a real estate auction. It is helpful to speak with those that have been through the process before. Find an auction or two to go and observe before participating in one yourself. Houses that have been foreclosed on are sold as-is by the bank. Many times the buyers have extra work that needs to be completed in the house for this reason. Educate yourself on the process and the stories.
Locate a Foreclosure Auction
Obviously you need to know how to find an auction in order to participate in one. There are several places that you can go to in order to find auctions in your area. First, you can contact a mortgage lender. They have on-going lists of the houses that have been foreclosed on. Foreclosure auctions are printed in the newspapers and you can find them listed in online searches for your area. You can also visit the website for the U.S. Department of Housing and Urban Development to find an online list.
Do Your Research
The majority of the time you are not able to see the interior of a foreclosed home that is at auction, so it is key to complete your due diligence in other areas before deciding to bid. Have a title check completed to make sure that there are no issues or liens before you buy the property. Have a local realtor show you comps in the area so you know an estimate of what the home is worth. Find out what other similar houses in the area have sold for or are listed for. Inspect everything you can on the property even if you can’t go inside. Many times the exterior condition of a home is a good indicator of what you will find on the inside.
Establish a Price
After doing your market research it is time to determine what you are going to bid at auction for the house. You don’t want to bid too low and not secure the property, but no one wants to pay more than they need to at an auction. Before the day of the auction contact the auction trustee to find out what price the bank is willing to accept for the property. If the price is over what you are willing to pay, move on to find another property that is within your budget. Get advice from a qualified real estate agent. They can tell you approximately what the homes in the area are selling for and prepare you for what you will expect.
Bid at the Auction
If you have never been to a real estate auction it is easy to get overwhelmed. Going in prepared is the best thing you can do. To avoid getting caught up in the excitement of the process know before you go what your limit is. Establish a price that you are not willing to go over, and then stick to it.
If you are able to place the highest bid and the bank accepts you will be required to make a down payment at the auction. You will need to have cash or a cashier’s check in your hand. Shortly after you will be required to pay the remainder of the money owed after you have closed on your financing.