Buying at the Foreclosure Auction

Perhaps the most well-known method of obtaining foreclosure properties is buying them at the auction. The foreclosure auction is a live bidding process, just as you may have imagined. The auction is typically conducted at a public place, such as a courthouse or even at the property itself. In some states, the county Sheriff or his deputy will conduct the sale. In other states, a referee appointed by the court will conduct the sale. Although the process is slightly different from state to state, the basics idea is the same – the property goes to the high bidder. The first bid will usually be made by a representative of the foreclosing lender. The lender can bid up the amount that is owed to him, without actually tendering money. If nobody else bids, the lender gets the property. In a majority of cases, nobody will show up but the auctioneer and the lenderís representative. Thus, in most cases, the lender gets the property; the less equity in the property, the less people that show up at the auction.

Buying at the auction is not for everyone, especially beginners with limited funds. You need cash, and lots of it, to buy properties at auction. If you have access to a large credit line or have a money partner, you can sometimes find real bargains at foreclosure auctions. Do not get too excited, though, because most properties either have too little equity for people to bother with, or have so much equity that a large crowd will show up to compete. Despite what you see on late-night television, a real steal at the auction is very unlikely.

Finding out Where the Auction is Held

The auctions for your city or county are usually published in a legal newspaper or the legal section of your local paper. You can also subscribe to information service providers that will fax, mail and/or email you this information on a regular basis. If you are following a particular property, contact the lenderís attorney or the trustee for information about the sale date. Call the day before to make sure the auction has not been postponed or delayed by the lender or by the borrower filing for bankruptcy.

Before Going to the Auction

Before you even consider bidding at the auction, you need to do some homework. Remember that your bid at the auction is absolute; there is no backing out. Your due diligence in researching the property can be quite time-consuming, and chances are you will not get a huge bargain. Sounds discouraging? It is, but you should try it a few time to get a feel for the process. Choose a few neighborhoods that can familiarize yourself with and bid only on those properties.

Check the Condition of the Property

You need to drive by the property to find out what condition it is in. Good luck in trying to get inside, since the homeowner isnít likely to let you in. If people are living in the property, you can make the assumption (most of the time) that there is running water and electricity in the house. However, you must assume the house needs at least the basic cosmetic upgrades: carpet, paint, new appliances, new kitchen cabinets, new vanity in the bathrooms. If the house looks vacant, take a peek inside the windows. The less information you have about the inside, the more conservative you need to be with your fix-up estimates.