Houses sold through foreclosure auction are often priced below market value so banks can liquidate assets from their inventory. As with most types of real estate transactions, there are pros and cons of buying repossessed properties through public sales.
It is smart to attend a foreclosure auction or two to get a feel for how the process works. Auction company policies will vary by state and auction company, so it is important to locate bidding requirements ahead of time. Attendees can obtain policies by direct contact with the auction company or through attending mortgage companies.
It is not uncommon for participants to compete with multiple buyers to purchase foreclosed homes for sale. Most auctions require bid acknowledgment by the auctioneer, while others are silent and require bidders to submit bids prior to the sale.
Some auctions are conducted online, but most take place in public venues such as state fairgrounds or courtrooms. In some instances, public real estate sales occur in front of the repossessed property.
Attendees will need to determine if preregistration is required, along with attendance fees. Most auction companies require a down payment to secure real estate once bids are accepted. Others require full payment at the end of the auction or within 24 hours.
Individuals who place the highest bid win the house as long as reserve prices are met. Buyers should establish a maximum budget to prevent over bidding. It is easy to get caught up in the bidding frenzy and pay more than the property is worth. The goal of buying properties through foreclosure auction is to save money, not waste money.
The sale price of foreclosure real estate is determined by the balance owed on the mortgage note. If tax liens or creditor judgments are attached, buyers will need to engage in negotiation to remove attachments. This often requires assistance from a real estate lawyer.
Buyers must be proactive in researching public records to determine the true cost of the property. Real estate deeds and mortgage notes are a matter of public record and recorded through local courts. In many cases, public records can be viewed online or downloaded for a nominal fee. Taking time to learn about the property can result in smarter purchasing decisions.
It is also a good idea to gather comparable sales reports to research market value of other homes for sale in the area where property is located. Comp reports can be obtained online at real estate websites such as Realtor.com, as well as through local realtors.
Once buyers submit a winning bid they submit final payment to obtain property deeds. These deeds must be recorded with new owner information and recorded through county courts. The time required to present real estate transfers varies by state. Consult with a lawyer to ensure compliance. Otherwise, you may face hefty late penalties and fees.
Some states require court confirmation of the sale before property transfer occurs, while others allow immediate transfer. Many states offer foreclosed property owners a redemption period that allows them to purchase their home from the winning bidder. This can be problematic for investors who plan to use the home to generate rental income and for buyers who need to make repairs. Redemption periods normally expire after 30 days.
Buying houses through public sales can be rewarding and profitable if buyers understand the policies and procedures. It can be helpful to consult with a real estate lawyer or foreclosure specialist or attend auctions with seasoned investors.
Public real estate auctions are often published in the real estate or Classifieds section of newspapers, as well as online. Individuals can also call their county Trustee or real estate commission to obtain a list of upcoming foreclosure auctions.