The Good Part

A house acquired from an auction assures the winning bidder that he is the legitimate owner of the property. Unlike buying from a bank or directly from the homeowner, the law does not allow other bids to be entertained once the gavel has been put down and a winner has been declared. Even if the offer that comes after the bidding is better than the winning one, sellers are not allowed to entertain them and they are legally bound to follow this rule.

Acquiring a house from home foreclosures auctions also offers a quick process that could be finished by the end of the auction day. Winning bidders are usually given 90 days to close the deal, but paperwork and details should already have been worked out by the end of the bidding day so all the buyer needs to do is provide the complete purchase price within that 90-day grace period.

What Buyers Should Watch Out For

One worry that buyers should concern themselves with is the amount of money that they need to take with them when participating at an auction. Most auctions require the winning bidder to shell out 10% of the full price right after being declared the winner. In addition, auction house fees, closing costs and other expenses are also required right after the bidding war. The money should be in cash or in cashier’s checks and no excuses will be accepted for such cases.

In some states of the U.S., the requirement is not just 10%. Some auctions call for bidders to have the full amount of their highest bid with them before they are allowed to even participate in the bidding contest.

Buyers who prefer home foreclosures auctions can get a lot of good bargains from these events, but they should have enough financial resources since having the money on hand during the bidding is a must for this type of foreclosure buying.

Often auctions are cancelled or postponed to give the homeowner a chance to pay off the mortgage. To ensure that you are not showing up for an auction that is not going to happen, call the trustee a few days before it is scheduled to confirm the date and the place. Also inquire about the bidding procedures that are going to be used, as these vary from state to state.

Before heading to the foreclosure auction, be sure that you know about the resell value of the property. The key to making money in foreclosures is purchasing homes at a deep discount. If the home is just a few thousand dollars cheaper than it will be when you resell it, you will not make enough money off of it to make bidding worth your while. Also, take some time to research the condition of the property.

If there are any major repairs that are needed, you should know these before buying the home. Decide if the repairs are something you want to do yourself, or if you want to resell the home with the problems and take a cut in your profits.

The opening bid at the auction will be set based on how much is owed on the property. Also, any fees or liens against the property will be included in this amount. Be sure that you know the opening bid before heading to the foreclosure auction, because this will help you determine if the property is worth your investment. Also be sure that you have the capital for your investment in place, because you will have to pay for the home soon after bidding ends if you win the auction.

In some states you will need to have a check with you at the auction to buy the home if you win. Finally, be sure that you know what your maximum bid is going to be. Be sure that you are getting the home for at least 20% less than its full market value if you intend to resell it for profit.

If you win the auction, you need to have a way to sell the home quickly. The longer you sit on a home, the more you will pay for owning it. Unless you are going to move into the home yourself, have some interested buyers in mind before going to the auction. Once you have the deed to the property, you can then offer it to these interested buyers and sell it before you have to pay any taxes or fees for owning it.