Foreclosure Auction
A Guide to The Foreclosure Auction Process
If you’re new to the whole foreclosure auction process, but want to purchase a foreclosed property, there are some things you should know that can help you to get started. Auctions can be difficult and frustrating for beginners, but they are the only way that you’ll be able to purchase a property that’s been foreclosed on.
What Is A Foreclosure Auction?
A foreclosure auction happens when the allotted time before foreclosure has run out and the homeowner is not able to stop the process. At this time, the lender is entitled to auction the property off in an effort to get some or most of their money back, which is why the property is auctioned. Most of the time, the lender will bid the full amount of the mortgage, added to penalties and interest, so you’ll have to be able to go higher than this price. However, sometimes, the cost of the mortgage and fees is less than you would anticipate.
Now, one thing that you need to know is that the lender who has the property up for auction is not necessarily the only lender and you are responsible for paying off the other lenders. So, if you are purchasing a house that has been foreclosed on, you need to know how many lenders you will be forced to deal with and how much it will cost you to make the property yours.
Do Your Homework
Before you go to a foreclosure auction, you need to make sure that you know exactly what you are placing a bid on. For instance, a property might seem like a great deal at $50,000, but when you get further into your research, you find that there is another lien on the home for $150,000. So, that would take the price of the home up to $200,000 or more. You need to know if you are willing to pay all that money or if it would be more worthwhile for you to walk away from the property in question.
When you place a bid at a foreclosure auction, you should know that there is no way to withdraw your bid. So, even if the home winds up costing you upwards of $500,000 in the end, you will be stuck with the property, so make sure that you know exactly what you are going to be getting yourself into before you place a bid.
You also need to know that while an inspection showing there is structural or electrical damage might let you get out of the bid, you might be locked in anyway and that can mean huge costs for you as well. Instead, make sure that you can afford to make the necessary repairs that it might take to get your new home up to code. You are, of course, free to drive by the home and take a look at it to see how it looks on the outside as this is usually a pretty good indicator of the condition of the property.
How The Foreclosure Auction Works
When you go to a foreclosure auction, you will need to be able to deliver 10% of the final bid right there, so you should have it available, either in a cashier’s check or cash. From there, the rest of the money must be paid within 30 days of the auction.
You should also make sure to get to the auction site on time, because once it begins, it will end quickly and the property you are interested in could be gone.
If you are looking for a way to get a property at a really great price, you should know that a foreclosure auction is the way to go, but you should make sure to educate yourself on the process and how to best make the process smooth and exciting.
How to Find Foreclosure Auctions
Are you looking to buy a new home? Instead of visiting the online websites of realtors or flipping through their brochures, place your focus on foreclosure properties. Foreclosure properties are often considered a great buy, as they are easy to find and affordable. Due to the economic crisis, there are many foreclosure properties available.
One of the most popular ways that foreclosures are bought and sold is at an auction. This auction typically takes place at a county, town, or village government office, such as the clerk’s department. As for how you can find these foreclosure auctions, they are often advertised in local newspapers. You can also search local records, as foreclosures are public notice.
One of the few downsides to buying a home at a foreclosure auction is the inspection, as you aren’t typically granted one. Most bidders are bidding on the home as-is. As-is isn’t so bad, but it may be if you haven’t seen the property. With that said, since foreclosures are public notice, you should be able to get the address of the property in question. You will want to drive by. Although you should not judge a book by its cover, a drive by can give you an idea of what to expect. When you have doubts, it may be best to move on and target other auctions.
When you are serious about purchasing a foreclosed property at an auction, you need to be prepared. This preparation involves having finance lined up. Many will require that you either have the money on hand or show proof that you do have the financial resources needed to follow through with the sale. Contingency loans are generally prohibited. Check deposits are sometimes required before you can even place a bid.
As for the auction itself, it depends. It is not uncommon for bids to be sealed. Once everyone has placed a bid, the highest bidder will be announced. For bids that are not sealed, the auctioneer will start with a figure, often around $1,000 or less and the bidding will continue on. If you are the winning bidder, it is important to know that you may not be able to move into your new home right away. In fact, it is likely that you will be unable to do so. Many states give current occupants a redemption period or a grace period. This is where they can still fight to keep their home. After this point has passed, you can start the eviction process if the current occupants do not leave voluntarily.
You may want to attend a foreclosure auction and just sit on the sidelines. If you are unfamiliar with the buying and selling of real estate, foreclosures, or auctions, you can learn a lot. This knowledge is important, as many fellow bidders will be investors looking to turn a profit, not buy their first home.
