How to Buy Property in a Foreclosure Auction
Ever wonder how people make money in real estate? The secret to the market may lie largely in foreclosure auctions,which occur all over the country on a regular basis. Real estate is like stock in that you have to buy low and sell high in order to make a profit. Participating in a foreclosure auction is a great way to buy low.
Market Research
Although you could subscribe to online services that let you know when foreclosure auctions are going to happen anywhere in the country, you are asking for trouble buying property in a market you know nothing about. You don’t want to invest in property in Florida for example, if it is sitting in the middle of an area wiped out by a hurricane. It is best to stick with foreclosure auctions that are in specific locations that you are familiar with.
Smart Bidding
If you can contact the owner of the home before the property hits the foreclosure auction block, it is possible to buy the home before it gets that far. Usually, there is around a month before the auction during which time the homeowner may sell the home to avoid the foreclosure. Direct sells during this period are often gladly accepted by the mortgage lenders who don’t benefit much from the auction process.
If things don’t work out, you can still bid on the auction. Once you locate property you are interested in, you must determine which realtor is handling the auction and find out the details, such as if you are required to show up or if you can call in a bid.
The current homeowner is not going to open up and tell you all the details about the property. Foreclosure auctions are bound to different laws in every state, so it is your responsibility to find out what those laws are in the state you will be bidding.
What Should I Bid?
A general guideline is to bid around twenty percent less than the market value for the property. Estimated market values are listedin valuation reports which are public record. You need to at least inspect the property with your own eyes, or even better hire an inspector, because there could be major flaws with some properties. Although you can get bargains at a foreclosure auction, it’s not a bargain if you bought a home just about ready to fall apart.
Remember that you need to have the money ready to go for whatever amount you bid, because you typically won’t have much time to get it paid for. You must take this into consideration when putting in your bid.
