Winning a Foreclosure Auction

When it comes to real estate buying, finding the right deal is the goal of any investor. Foreclosure auctions can be a good idea but only if you’re capable and do your homework. As with any situation, a great deal is not always guaranteed, but it is possible. With these few tips below you can help to educate yourself and be able to get the best deal from a foreclosure auction.

What are the Laws?

Each state has their own laws and rules regarding foreclosure auctions. Take the time to learn as much as you can about your state's laws before you decide if a foreclosure auction is the best option for you. Also know that you will be buying the property as is and will be responsible for all repairs. It can be helpful to find out if anyone in your network has ever bought a house in an auction and what their experience was like.

How Does a Foreclosure Auction work?

Go to a few foreclosure auctions in order to learn more about how they work and how the bidding works. Once you feel comfortable about how the auctions will work then you should begin looking for real estate deals that fit your investing profile. You can use the U.S. Department of Housing and Urban Development to find up to date lists of foreclosure properties that are eligible for auction. You can also check with mortgage lenders, newspapers and even local courthouses to find postings of upcoming foreclosure auctions as well.

What’s the Property Like?

It goes without saying, but you should learn as much as you can (do your due dilligence) about a property that you are considering buying. Do a title search to make sure there are no liens against the property that will cause problems later. You should also visually inspect the property to determine an estimate repair cost and to be sure there isn’t anything glaring that will cause rehab issue later on. If you are not an agent, get the comps from with your real estate professional network to view similar properties in the area and determine what a fair price and bid would be based on the property's condition. And as always, rund the numbers to ensure your ROI (Return On Investment) is promising.

How Will You Bid?

You don’t want to bid too high or too low, so it’s important to do your work to determine what is right for you and the property. Go in with a plan. Since the house has been in default, a lower price may win the property but you want to stay competitive as well. Try not to get caught up in the excitement of the auction itself and stay focused. Talk with the auction trustee beforehand to determine if there is a minimum bid for the property and make sure it’s not above market value or what you intend to spend. Be prepared for counteroffers and have a final offer number ready when you arrive and stick to it. You will need to pay a down payment and pay for it not too far into the future. Have cash or a cashier’s check with you when you arrive and be sure you’ve secured financing (private money, hard money) for the rest of the purchase.

Finding a great deal on a property is possible if you do your homework; and foreclosure auctions are a great place to start if you know what you’re doing. It’s important to learn as much about auctions as you can and how they work before you attend your first one so that you don’t get caught up in the excitement or pay too much. You aren’t guaranteed a great deal, but if you know what you’re doing then you’ll be able to make the smart choice to uncover a deal that works for you.