Foreclosure homes are great options if you’re looking for a deal on a home. Oftentimes you can find wonderful hidden gems for much less that are up for auction, but you must go about the process carefully.
1. Track Upcoming Auctions
If you’re looking to buy a home at auction, you can do so either online or in person. You can visit a site like Auction.com for online listings, or visit your local county website or courthouse for information about upcoming biddings.
2. Understand the Foreclosure Process
The foreclosure timeline is not simple or short. Typically a foreclosure occurs when the owner has missed 4 months of mortgage, about 90 days after the first notice of a missed mortgage payment.
Before the property is officially in foreclosure, it is in pre-foreclosure. You may see these listed online, but they are not ready to auction just yet. Once the property is officially foreclosed, it then goes to auction.
There are also REO (Real Estate Owned) or bank owned properties available at auction from time to time, but the process here is generally longer and not for you if you’re looking to buy quickly.
3. Research, Research, Research
When you see a house coming up for auction that you like, don’t go in blindly. Research everything. You’ll want to make sure the title is clean, get a rough estimate on the resale value, determine how much the current owner still owes, and read the due diligence documents thoroughly. You may want to seek professional help from a real estate attorney or title company in this process.
4. Understand the Risks
No matter how prepared you are, buying a foreclosure property through auction is always a risk. Inspections and appraisals are not options, and there is no room for contingent offers. The standard protections in place when going through the normal home buying process are not there. Be aware of this going in and expect to encounter a few issues along the way.
5. Check Out the Property
Many auctions will not allow you to check out the inside of the home prior to sale (and in fact this may be illegal in many cases). However, you should definitely drive by and take a look at the exterior. If it looks like a dump from the outside, expect to find it in worse condition inside later. Alternatively, if the property looks well cared for externally, this is a good sign that the interior is in relatively good shape.
6. Prepare Your Finances in Advance
Most auctions will require a cash or money order payment on the spot, so you’ll want to have your financing taken care of before the day of the auction. You can of course use an interest free down payment investor like Home.LLC to assist you with this process!
Buying a home at auction is a risky business, but can pay off nicely if you do your homework! Let us know your auction success stories in the comments!