How To Buy A House At Foreclosure Auctions

When a homeowner is delinquent on their mortgage payment they will be given a grace period to find foreclosure help and bring their payments current to avoid foreclosure. Depending on the lender and on which state the property is located, this grace period can be just a few weeks or several months. If the payments are not brought current, the lender has to notify the homeowner their intentions to sell the property at a public auction also known as a foreclosure auction.

Although foreclosure auctions are a sad time for delinquent home owners, these auctions offer excellent opportunities for real estate investors and conventional home buyers. Foreclosures sold at auction are generally available at below market value, but there are some catches to purchasing during foreclosure. Here is information that will be helpful to those inexperienced in buying foreclosures at auction.

• You can find foreclosure listings through online services, documents listed at your county courthouse, local newspapers and through many realtors who specialize in foreclosure listings. Once you have found a property you’re interested in, drive through the neighborhood and by the property to get a feel for the area. If this is for your home, make sure this an area you want. If you are buying for investment, make sure this is an area that you’ll be able to sell in for a profit. Note that it is also important to be discreet in your actions. There may be a chance meeting with the homeowner that could allow you to make an offer to buy the property before the foreclosure.
• Check the value of the property you are looking at, is it a bargain? Find out the balance of the loan and search for any other outstanding loans or liens on the property. That possible chance meeting with the current owner can give you a lot of insight to the property and any repairs that may be needed. Get an estimation of the market value of the property. You want to make sure the outstanding loan balance isn’t more than the resale value. Look for the history of ownership; this should be available through court house records. If you can’t find the information yourself, use a local real estate agent for guidance and help. The more owners a house has had may indicate a problem with the house itself or the area.
• If you will be living in the house, estimate your monthly expense. Combine your monthly mortgage, taxes, insurance and consider not only basic maintenance, but what it may need when the current owner vacates the property. Add all the expenses up and subtract that from the market value of the property. This will be the number you want to keep in mind as you start bidding at the auction.
• After doing all your homework on the property, you want to make sure of the status, where, when and any requirements of the foreclosure auction. There are factors that can change an auction up to the last minute. Even after an auction is scheduled, the owner will have a short time to pay the balance of the loan and stop the foreclosure. Or the auction date may be moved to a new date. Postponed or cancelled auctions are usually announced at the time and location of original auction, but you may find out sooner by calling the trustee or the attorney that is charge of the foreclosure. Auctions are generally held in the same county the property is located, and in most states those auctions are held at the county court house. The county clerk can give you the location of mortgage auctions but not tax foreclosure auctions.
• Each state has different requirements for what you need to bring to the foreclosure auction. They may want the full amount of the bid in cashier check or maybe a percentage of the bid amount. If you can’t meet the financial requirements of the auction, you won’t be allowed to bid.
• When it comes time for the auction, it can be overwhelming and intimidating the first time. Every state has different laws and processes of foreclosures and bids. You need to educate yourself if that is where you decide to purchase your home or next investment. You may want to sit and observe an auction first, taking notes and asking questions. A trustee, attorney or real estate agent is a great source of information.
• The day before the scheduled auction, call the trustee or attorney one more time to check the status of the property you want and confirm that the auction is still scheduled as posted. Arriving early and locating the auctioneer is recommended, position yourself in a good visible spot close by. Observe the other participants as they arrive, picking up any cues that may be helpful, but don’t let on what you’re bidding. There are aggressive real estate investors who are seasoned with bidding and auctions. Set a limit on how high you’ll bid and stick to it. Don’t let yourself get caught up in the activity and overbid what you can afford or what you decided was the value of the property. If you aren’t required to pay in full at the time should you win the bid, make sure you are on time paying the balance or you will forfeit any deposit.
• If you win the bid, you need to seal the deal. Get all the necessary documents from the auctioneer to prove your win. Get instructions from the auctioneer and a real estate attorney what you need to do next in order to take possession of the property. Ownership may be transferred immediately in some states, others it may take as long a month for the process to be completed. It is also possible in some states that the owner of the property is given the opportunity to buy back his property from the winning bidder for the full amount paid at auction plus fees. If there is such a period on the property you just bought, don’t start any repairs or improvements till that redemption period is closed.
• You may find that you are the one responsible for evicting the current owners. Should this be the case, you should contact the county sheriff office and find out what legal process you need to follow.

In the foreclosure process, there are several moments to buy and each comes with its own risks. When you buy at foreclosure auction you are not allowed the liberty of inspecting the property thoroughly, only visual inspections are allowed. However, foreclosures auctions offer great deals to be had and can be an exciting way to purchase foreclosed real estate.

By: A. Myers Kennedy

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