Search
Foreclosures FREE For 7-Days!
Free access for 7 days, try it out! No strings, no contracts, no
hassles and you can cancel at any time. Hurry! Foreclosures sell fast.
Visit RealtyTrac.com. With virtually every Bank, Government and
Institutional property you'll find your next home waiting for you
The
Ins and Outs of Bidding and Paying at a Public Foreclosure Auction
By
Rick Sharga, Vice President of Marketing for RealtyTrac
In
the fast-paced foreclosures market, many sales are made at public
auctions. While attending auctions can be a great way to purchase
a property well below its market value, the process moves rapidly and
can sometimes seem like a dizzying blur to the prospective buyer.
These
events are often frequented by more seasoned buyers and investors who
understand the ins and outs of the process, so you need to be prepared
if you plan to attend an auction. That means understanding the auction
process before you arrive, including how to make a bid and actually pay
for the property if you bid successfully.
Real
estate investment trainer and author T.J. Marrs says he rarely
frequents auctions and prefers to buy during the pre-foreclosure period
whenever possible, simply because of the growing number of bidders
driving up the prices at auctions. However, he advises those who
do plan to buy at auctions to “get to know the property by either
personal inspection, professional inspection or by getting as much
background information on the property as possible.”
Those
who heed that advice and take time to understand the foreclosure
auction process have a better chance of achieving a successful outcome.
First
things first: Know when and where, make time to prepare
While
the details concerning public auctions differ from state to state, and
whether the sale is judicial or non-judicial, usually foreclosure
properties are auctioned off at the site of the property or at the
courthouse in the county where the property is located. The date
of a scheduled auction is typically posted at the courthouse, at the
actual property and in a local newspaper.
Thanks
to online data services like RealtyTrac, buyers and investors can use the
Internet to locate auction property nationwide. RealtyTrac maintains a
daily updated list of sale notices nationwide along with property
research tools, giving buyers the information they need to prepare for
an auction. Buyers can find the street address, which gives them a
chance to view the property (at least from the outside), evaluate the
neighborhood to determine what the property is worth, and plan a
reasonable amount they would be willing to bid for the property at the
upcoming auction.
Most
likely, you’ll be bidding on a property without really knowing its
condition on the inside, so it’s important to do any research you can
in advance in order to minimize the risk of over-bidding and increase
your return on investment. It’s also a good idea to research the
title on the house and to find out what you’re actually bidding on at
the auction, such as whether it’s the first mortgage or second
mortgage. This information is crucial to bidders because it
affects whether liens will remain on the property or dissolve as a
result of the foreclosure auction.
“You
have to know the property inside and out and know the party that is
auctioning the property is, in fact, in the first lien position,”
advises Marrs, noting that if you buy from a party that is in a
secondary lien position, you could be responsible to pay for the first
lien in addition to the auction price.
Game
Day: What to do
The
morning of the auction, it’s a good idea to contact the lender’s
representative to confirm whether the auction is still taking place as
scheduled, since lenders sometimes change the date of the auction at
the last minute.
This
is also a good time to verify the opening bid for the property, so
you’ll know what to expect and be better prepared to plan your bidding
strategy.
The
rules (and art) of bidding
The
lender typically sets the opening bid by calculating the full amount
owed on the loan. This includes the principal, interest, any late
charges, penalties, and foreclosure fees (as allowed by state
law). At the auction, proceedings are opened when the lender or
official running the auction announces the sale and the opening bid
amount, with bidders free to call out bid prices until a high bid is
reached.
At
your first auction, knowing what not to do is almost as important as
knowing what to do. The day of the auction, it’s important to
feel confident in your ability to bid, so that you won’t be distracted
by comments or “advice” given by other bidders. Remember,
everyone attending the auction is likely there to bid against you, so
it goes without saying that you’ll be hard-pressed to find a mentor to
guide you through the process and look out for your best
interest.
“Since
you’re paying cash and there are a lot of unknowns, certainly you
should keep your maximum bid in a safe range, like 60 to 70 percent of
market value,” suggests Marrs, adding that one might be willing to go
higher than 60 to 70 percent in more competitive markets.
Handing
over the money
Once
congratulations are bestowed on the highest bidder, it’s quickly time
to pay up. The majority of auctions require the successful bidder to
pay for the property in full, in cash and on the spot. So it’s
important to have your finances in order well before the date of the
sale and come to the auction with cash or certified funds such as a
cashier’s check, money order or a bank certified check made payable in
the buyer’s name.
In
some cases, the successful bidder is given 24 hours or even up to 30
days to pay the full amount cash. Check state
foreclosure laws
to determine the auction payment options for each state.
A
few things you should know before moving in your furniture
Once
you’ve placed the high bid and paid in full, the property is yours for
good, right?
Not
exactly.
Like
anything else, there’s a bit of fine print to be aware of when buying
at a foreclosure auction. In some states, the original owner of
the foreclosed property has what’s called a right of redemption.
For a set amount of time (often up to 12 months), the original owner
has the right to pay the full amount owed for the property, plus any
applicable fees and interest, and buy it back it, barring any
additional foreclosure activity. It’s a good idea to check the
foreclosure laws in your state to understand what right of
redemption exists. Though these procedures are rarely taken
advantage of, it’s important to know what they are.
Foreclosure
auctions certainly present great opportunities to grab bargain deals in
the real estate market. But they’re not for the faint of heart, nor the
unprepared. Still, doing your research on the property for sale and on
how the process works can demystify things, allowing you participate
with confidence.
Good
luck and happy bidding!
|
