Buying a house at a foreclosure auction can sometimes be an overwhelming process. These auctions conducted in convention centers and on courthouse steps around the country can be a little intimidating, but the real trick is to avoid any pitfalls and do your background research.
How does the entire process work?
Most buyers are not aware of how these auctions function. If you are considering purchasing a home from an auction, it’s a wise idea to go for a few auctions only to observe and learn.
• Watch others – you can learn a lot about the social and business atmosphere present at these auctions if you visit just to observe and take it all in. You may also take notice of buyers are dressed in formals trying hard to convince the lender. Their overpowering mannerisms, technical terms and method of approaching may give them an upper hand in winning the bidding war. You will be surprised how much you can take away from simply observing investors, or those with prior auction experience, in action on the auction floor.
• Research as much as possible – sometimes you get notices about any upcoming auction in the legal segment of your local newspaper. Please note that it’s common for these auctions to postpone their dates from time to time, so make sure that you confirm all the specifics before attending one.
• Narrow your options – Start the process by first choosing a neighborhood that you would like to potentially purchase a home in. Research the listed auction properties located in that particular neighborhood. Make sure that the neighborhood has enough foreclosed properties, which means that the prices are continuing to drop.
• What to bid on – Begin by asking yourself, “Why do I want to purchase a property from the auction? Are you planning to keep it for yourself?” Do you want to remodel and flip it?
Do you want to rent it? Before placing your highest bid is by knowing the following details:
a) What was the selling price of similar properties in and around the neighborhood in the past few months?
b) Use the help of professionals to know what the house is likely to sell for in future
c) Estimate necessary fixing and improvements that need to be done in the worst circumstances.
Requirements – you could get in touch with attorneys or the auctioneer to know if you need to bring any money with you. Most ask bidders to come with a $5000 check payable to the auction agency. This requirement is only to show that your bidding is legitimate. The winning party will sign the check to the auction company, while others will redeposit their checks. You should also take note that big auction firms charge a flat fee or percent of the sales price of their services.
Remember, the bid amount that you submit at the foreclosure auction is final and you can’t take it back. You will not get any waiver on home inspection as well. If you think the repairs on the house will cost you $10,000, you do not want to pay $100,000 at the auction, especially when you know that a ready to move in house listed next door is just $120,000.
Always be on time for such auctions because even if you are five minutes late, you may miss out on a few crucial items. The first few properties at the auction usually sell for less because experienced bidders are in the process of trying to identify the pricing pattern. Make sure that you are “all ears” to any pricing that is reasonable. This is exactly where your research helps you to respond quickly and effectively, ultimately winning you that home that is priced affordably.
How Can I Buy A Home At The Foreclosure Auction?
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