Exploring opportunities for investing in real estate? Interested in buying a foreclosure at auction? Don’t miss out of some of the best deals on the market.
Auctions can be intimidating places. A little basic knowledge and effective preparation will help buyers avoid unexpected property costs, tackle court proceeding and compete for the right foreclosure property.
First Steps to Prepare For a Real Estate Auction
Search for Properties on the Auction Block
Auction properties move quickly. It is important to have access to up to date databases listing local or national properties for auction and sign up for notifications for properties meet your search specifications. When you find a deal that fits your needs and interests, you will have to move quickly to research, inspect and organize your financing before the auction date.
Assess the Value of Your Bargain
The opening bid will reflect the total amount owed (including fees) to the mortgage lender foreclosing on the property. The difference between the amount owed and the market value reflect the potential profit. This will help you decide if you are getting a bargain or not.
Pick a few potential properties and do some quick research. And don’t fret, most of this information is available to the public through your local county recorder’s office:
- The Estimated Market Value of Property
- How Much is Owed on the Mortgage
- Any Liens Against The Property
The winning buyer may be responsible for any outstanding liens on the property. You may also check for liens with a real estate attorney or title company. If you can visit the property, take note of recent sales in the local market and the potential for increasing the appraised property value by making home improvements.
Familiarize Yourself with Local Auction Locations, Laws and Procedures
Real estate auctions are typically held in a public place. Check with each properties’ local county clerk’s office and online forums for mortgage foreclosure auction locations. And if you cannot locate the auction through public record, contact the trustee.
Once a property is scheduled and listed for auction, the owners often have an opportunity to cancel or postpone the foreclosure. These changes are usually announced on the scheduled auction date.
Set Your Bid Limits
Review your finances and decide how much home you can afford to buy or risk in a real estate investment. From here you can begin to set up financing with a home equity line of credit – cash – or a regular mortgage loan secured through the property being acquired. Set a firm cap on how much you are willing to spend on each property you bid on to avoid getting wrapped up in the rapid-fire auction atmosphere and over spending.
Bidding – Going Once….Twice…Sold
If you have never bid on a property before, it may be a good idea to observe a few before getting in on the action. Once you have financing and are ready to start bidding –
- Arrive at the auction early
- Don’t get ruffled by competitive bidders
- Focus on the properties you are there to buy
When you reach your spending limit – stop. And if you are outbid, move on and and get ready to compete for the next bargain.
Once you have won your first bid, it is time to give the required documents to the auctioneer or real estate attorneys, and receive instructions on procedures for the transfer of title. Some auctions allow you to assume ownership immediately, while other foreclosure regulations require waiting periods for court confirmations or redemption periods giving original owners to re-buy the property for the full amount. And certain foreclosure regulations require new owners to evict any tenants not removed by the trustee.
Key in hand. You are now the owner of a real estate bargain. Time to move in or complete the home improvements which will increase the value of your investment.