With all of the foreclosures that are taking place, many people are looking to take advantage of purchasing a home through the foreclosure auctions. However, the process is not always as simple as it may seem. Keep in mind there are many pitfalls so like they say, “buyer beware”! Here are a few tips to help you make sure you are really getting a good deal when buying a home through the auction process.
Get a list of properties for sale.
You can do this by contacting the trustee of the sale. Often times there will be many properties for auction on the same day. In some locations you may have to contact a number of trustees to get information on various properties that are scheduled to be auctioned.
Review the properties.
Scan through the list of properties to find the ones that meet your criteria. You may have to do a little research to find out thing like the size of the home, the number of bedrooms and bathrooms, or the total square footage. You can consult with a local realtor, who may help at a price or in most areas you can search basic information on the county website, or perhaps other real estate sites such as zillow.com or cyberhome.com.
Inspect the property.
Whenever possible you need to take a good look at the property, both inside and out. Be careful here. Often times the current resident is the one losing the property to foreclosure and may be hostile. Make a list of all of the repairs that you will need to do to make the home livable. If you can, make sure the plumbing, electricity, heating and cooling work, because these repairs could be costly. If the current residents are amicable ask questions about things that need fixing.
Verify the lien position of the note holder.
Sometimes, properties that are going to auction are done so by the second lien holder. This means if you win the auction you only took out the second position owner on the property and there is still a first position in front of you, which means you inherit the loan balance and it may be due immediately.
One last review.
Now that you have narrowed down the total number of potential homes and ready for the auction, you should take one more look at the homes on the morning of the auction. You want to make sure the property has not been vandalized, or major items removed on the last day before the auction. In some cases, people have taken things like the cabinets, toilets, air conditioning and heating units. Make sure you know the status before you bid, because once you win the auction the property is yours, as is.
Have funds ready.
Finally, when you go to the auction, make sure you have the funds available. Contact the trustee ahead of time to know how much you need to have with you to bid at the auction. Generally this is the down payment and is usually around $10,000 in the form of a cashier’s check. Once you win the auction, the balance of the loan is due with certified funds within a day.
Always keep in mind you may not be able to estimate all of the costs associated with fixing up the property and make sure to plan accordingly.