Thinking About Buying at a Foreclosure Auction? Prepare with These 5 Steps
Foreclosure auctions seem like the home buyer’s dream come true. Homes often sell for far less than market value, and for the buyer with ready access to cash, a foreclosure property could be turned into profit very quickly.
Of course, buying foreclosures at auction is tougher and riskier than it seems. Before a buyer bids at a foreclosed homes auction, he or she has a lot of ground work to do. Here are some foreclosure auction tips that will help tilt the scales to home buying success:
Learn About Foreclosure Sales
Most auctions are conducted in a public place and administered by an official representative of the state, such as a county sheriff. These auctions are public and are usually announced in local newspapers or are listed with internet resources.
At a foreclosure auction, bidding begins with the lender who owns the loan to the property and proceeds until a high bidder emerges.
Before you actually attend a foreclosure auction, you should think about checking out a few auctions to get a feel for the market and the prices that homes typically get when they go to the block. This experience will be a big help when you are ready to develop bids.
Locate Your Target Property
Once you have a feel for the process of foreclosure auctions, begin keeping an eye open for foreclosure sales. Cruise through neighborhoods that you are interested in and keep an eye open for foreclosure signs. Develop contacts with a local realtor’s office. You should also periodically check your state or county’s websites for foreclosure auction information.
Determine Market Value
Get ready for the hard part. Determining the market value of a home up for foreclosure auction can be tricky. You definitely need to research the title and discover any liens or other financial obligations that you get along with the new property. Also, stop by the home and examine its physical condition. Most likely, you will have to content yourself with a quick look at the outside. Use your examination to get a ballpark figure of maintenance and repair costs and factor those into the market value.
Develop a Viable Bid
The time to decide on a viable bid is long before the foreclosure auction is slated to begin. The maximum price you can pay will depend on a number of individual factors, including the purpose for which you will be using the new property and how long you intend on owning it. This maximum price must also be in the reasonable auction price range for the property—another good reason to attend a few auctions before ever bidding.
Take Possession of the Home
Should your bid win the auction, you must be prepared to deliver the required funds to the state’s representative. In some states, you need to deliver the full sale price of the property; other states require the deposit of a percentage, with balance owed in 30 to 60 days.