Novices should be Wary of Foreclosure Auctions

From August to November last year the number of foreclosures steadily dropped but remained much higher than 2008 according to RealtyTrac. The foreclosure filings of November 2009 (including all the stages of foreclosure) were 306,627. It was a drop of about 8% from October 2009 but a spike of 18% from 2008 November. It calculated to a rate of 1:417 in the country.

Across USA the default numbers fell by 8% from the previous month of October but it was higher by 22% from 2008 November. The number of auctions dropped by 12% from October but it was higher by 32% from 2008 November. Bank foreclosures remained the same from October but were less by 2% from 2008 November.

Most of these residential houses would be auctioned off. Robert Friedman of Real Estate Disposition Corporation now oversees about 500 auctions per year. He says that although there are deals to pick up the newcomers should be cautious. Friedman observed, “Getting a steal at auction boils down to preparation. You have to set out to quantify risk, inspect the property well, and then quantify the necessary repairs and run price comparisons, or ‘comps,’ in the neighborhood so you’ll know the values.”

Many newcomers have never attended a property auction hitherto – the big ones operated by REDC or the more modest but tricky ‘trustee auctions’ held regularly on the steps of courthouses right across USA. Both can be confusing for the novices since these are laced with unforeseen risks – especially the trustee auctions.

In the bigger auctions dozens of foreclosed units are put up for auction. Novices may feel at sea in the midst of bids and whistles dotted with finger signals. Thus expert’s advice is that before taking part it is better to attend few auctions as an observer to get to know the ins and outs.

The bidders are generally expected to come with a certified cheque – the amount depending on the size of the estate. If successful the cheque is handed over to the firm conducting the auction. In the bigger auctions the important mortgage lenders are present.

Another point to note is the buyer’s premium. REDC and other companies akin to it like Williams & Williams generally charge 5% for their services. Thus while calculating this amount should be added.

Unlike the trustee auctions the houses in these events are always free from all liens and taxes are current. But the condition of the house may be poor and repair costs may pop up as unexpected bad surprises.

Original Post: Novices Should Wary Foreclosure Auctions