how to buy a foreclosure property at auction

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If, in the unusual case that the home is “worth” more than the opening bank bid and you wind up being the successful bidder, you will need to go to settlement usually within 30 days of the auction or as soon as the results of that auction have been ratified by the local court.
How do homes wind up being auctioned off on the courthouse steps in the first place? When a lender agrees to loan you money to buy your home you are asked to sign a document called a Deed of Trust.
How do you bid? Once you have located a property you wish to bid on, have at least conducted a visual inspection, researched the property online and via the agent’s databases and have your minimum bid amount in the form of a certified check, you are almost ready to bid.
Public land records can be searched online or in person to discover who owns the home, when they bought it, perhaps how much they originally borrowed, the address where the real bills are sent, the amount of any real property arrearages or other tax liens.
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In the off-chance that the home sells at auction for more than the amount owed to the lender, trustees make sure that the excess goes back to the borrowers.
When a borrower fails to pay his loan payments, the Deed of Trust permits the lender to auction off the home in order to recover as much of its loan as possible.
There are many Web sites that compile foreclosures, and many real estate agents and auctioneers maintain lists of properties being auctioned off at foreclosure.
During that 30-day period, you will need to finalize your loan, have your settlement attorney conduct a title search and survey and coordinate all other required steps, such as conduct any inspections you or your lender require.
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This means that the lender will open the bidding at the amount it is owed, and the auction will not even generate any bids.
In the Deed of Trust, the lender appoints one or more people, called trustees, who are empowered to sell your home at the courthouse steps if you fail to make your loan payments.
Tips for contacting the trustee Calling the trustee is an important step in pursuing any pre-foreclosure or auction property, but it’s not always the easiest or most enjoyable step because many trustees are not geared toward providing information to the general public.
Buying homes at public auction If the loan for a property is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction.
Be Ready Before Bidding Begins Buying a property at a public foreclosure auction is not for the faint at heart.
Checklist to buy properties at public auction Real estate auctions are a quick and efficient way to sell and buy property.
Foreclosure auctions, conducted on courthouse steps, in convention centers across the country and even at the property in foreclosure, can be intimidating.  The trick to avoiding foreclosure auction pitfalls is to do your homework.
Bidders also need to be aware that large auction firms, such as Williams & Williams and The National Auction Group, charge either a flat fee or percentage of the sale price for their services.
Many buyers have never attended a foreclosure auction before – either a large auction in which dozens of properties from across a large geographic region will be sold or a smaller trustee auction.
Zillow also posts foreclosure auction information on homes, including location, date and time.
If there are outstanding liens on the property, the winning bidder at the auction may be responsible to satisfy these liens in some cases, so it’s important to check for any liens and the priority of the liens before you bid at the auction.
Some states have redemption periods for the owner, in which case the owner can buy the property back from you if they pay the full amount paid at the auction, plus applicable fees.
It’s also important to determine the bid amount even in states where you don’t need to bring the full amount to the auction.
Determining your bid amount is more obviously important in states where bidders are required to bring the full amount in cash or cashier’s check to the auction.
It’s important to know this amount so you can determine if the auction represents a potential bargain purchase when the opening bid is compared to the property’s market value.
After a property is scheduled for auction, the owner has a chance (typically less than a month) to stop the auction by paying the amount owed to the foreclosing lender.
In other states, bidders are required to bring a certain percentage (10 percent is common) of the bid amount to the auction and pay the remainder of the amount within a certain timeframe if they are the highest bidder.
In some states, bidders are required to bring the full amount they want to bid in the form of cash or cashier’s check to the auction.
The opening bid at the auction is based on the total amount owed to the foreclosing lender and may include fees incurred because of the foreclosure proceedings.
RealtyTrac subscribers have access to the opening bid amount and the estimated market value for properties scheduled for auction.
A reasonable purchase amount at auction is at least 20 percent below full market value, and much better deals are often possible.
Learn about the foreclosure process and the opportunities foreclosures present to home buyers and investors, along with useful terms and laws that will help you along the way.
Learn how to take advantage of great real estate deals whether they are pre-foreclosures, Bank owned (REO) or Auction properties.
Home foreclosure process can starts when the real estate owners default on HUD government loans.
Why would anyone be interested in buying a property at auction? Auctions offer a first chance to snap up certain properties, so in theory, some of the best properties get purchased at auctions.
Auction properties aren’t always great deals, but the potential to get a great deal is such a big draw that, for many people, it compensates for the numerous potential drawbacks of buying an auction property.
Auctions can be a riskier way to purchase a property than buying a property through a real estate agent, so it’s important to be extremely well-educated about the process and about the properties you are interested in bidding on.
The other main way a home ends up at auction is when the owner doesn’t pay property taxes or becomes severely delinquent on state or local income taxes.
Winning bidders will pay any auction fees and/or bidding fees and put down an earnest money deposit on the property they are purchasing before leaving the auction site.
Bidders at property auctions are often real estate investors who can afford to pay cash, but for auctions that allow financing, it is best to get prequalified ahead of time.
Bidders can avoid this problem by working with an auction house to ensure that the property has clear titles.
If a property winds up at auction, it means the owner was having financial trouble, so the house may have deferred maintenance problems.
Many buyers go through real estate agents who specialize in foreclosures, but if there’s a particular property you have an eye on, Blomquist says you can approach the lender directly after the foreclosure but before it’s listed for sale.
First of all, if you’re new to the foreclosure market, don’t even think about buying a property at a foreclosure auction, says RealtyTrac vice president Daren Blomquist.
If you’re seeking to purchase a foreclosure with an FHA loan, Blomquist says the requirements pertaining to the condition of the property are stricter.
The bank that owns the title isn’t going to make needed repairs for you before the sale, and it’s unlikely to lower the price to compensate you for repair expenses you’ll incur.
Factor the cost of any necessary repairs into your budget, since foreclosures are generally sold “as-is.” “Be aware with these REO or bank-owned properties that a lot of them are in pretty poor condition,” Blomquist says.
The bank is required to pay off senior liens like back taxes, you won’t have to kick out anyone living there and you’ll be able to inspect the homes for damage and figure out how much you’ll need to set aside for any repairs.
An increase in foreclosure activity might sound like bad news, but it’s actually a good sign for these markets because it means the logjam that’s been keeping housing in the doldrums is finally starting to break up.
Prospective buyers can’t inspect the home to determine if there’s any damage — highly likely if the house has been vacant for a while — or find out if there are any senior liens (such as outstanding taxes owed on the property).
In fact, in 2010, a record 2.87 million properties received default notices, went up for auction or were repossessed, and 2011 is expected to be far worse with a frightening 20 percent jump in foreclosures [source: Levy and Gopal].
Harrison, Denise.  "10 Tips to Keep In Mind at Foreclosure Auctions"  08 March 2011.  HowStuffWorks.com. < ;  19 October 2014.
Real Estate Image Gallery Heading to a foreclosure auction? There are a few things you should know before bidding.
You can make an offer to purchase a property when it’s in pre-foreclosure, when the lender agrees with the homeowner to accept less than the outstanding balance of a mortgage loan and avoid foreclosure.
Regardless of which phase you are attempting to purchase the property, how do you begin the process? There is a growing selection of foreclosed homes to choose from across the country, as today’s faltering housing market yields hundreds of thousands of these properties.
So [buyers] kind of end up in the same position as the people who currently own the house in that [they] can’t get financing or can’t afford the financing that’s out there,” says Bobbi Dempsey, co-author of “The Complete Idiot’s Guide to Buying Foreclosures” (Alpha).
One caveat: When you buy a property at an auction, be sure you have investigated the “right of redemption” law, which means homeowners can reclaim their property within a certain period of time if they pay all past-due amounts and applicable fees for the property.
According to Dempsey, foreclosure sale ads from the U.S. Department of Veterans Affairs (VA) and the Federal Housing Administration (FHA) are posted in the newspaper on a regular schedule; her book advises readers to contact the classified manager at the paper for the schedule.
Buyers can expect a discount of 10% to 25% compared with buying a home through traditional channels, says Dean Street, an agent and 30-year veteran of foreclosure buying in the western U.S. But the road to auction can be bumpy, too.
Another hassle: Most foreclosures that go to auction get postponed, usually due to bankruptcy or loss mitigation (when the bank tries to compromise with the borrower), says Chris Matty, marketing director of ForeclosurePoint.com. He notes that opening bids also change frequently, especially as home values are marked down further.
This is my favorite way to buy a house because huge amounts of equity is created in minutes with the foreclosing trustee sale.
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Ride along with kris haskins to see how to buy a foreclosed house at the courthouse steps.
If you are purchasing under a legal entity other than your personal name (such as a formed corporation, partnership, LLC or trust), Auction.com requires evidence demonstrating ownership and control of the entity, as well as evidence that the entity is in good standing.
Obtain an Auction Bidder Card and raise it when the auctioneer announces a price that you are prepared and willing to accept as your winning bid.
Once you have clicked on the state you are purchasing in, select What do I need to bring for information regarding what is required at each auction event.
©2014 Auction.com, LLC.
To learn more about all aspects of the home buying process, including buying foreclosed homes, fixer-uppers, and others, get Nolo’s Essential Guide to Buying Your First Home, by Ilona Bray, Alayna Schroeder, and Marcia Stewart (Nolo).
Auctions often attract hard core investors who have the cash to flip the property (sell within a short period for a profit) and others who’ve been around the foreclosure block a few times.
Here are the pros and cons of buying a foreclosed home at each step in a typical foreclosure process.
Months after the buyer first defaults, assuming he or she doesn’t bring the loan current, the lender attempts to auction off the property.
We got a bidder’s card, talked to the bank reps and found out that one house we saw and researched had an opening bid within our budget and under the assessed value of the home — so we bid on it! Two other investors counter-bid a few times, but we won the bid and got our first house at the foreclosure auction.
Very good post! I have thought about buying a foreclosed property, but really don’t have the time to invest in researching the area, heading to the courthouse, renovating the house, etc.
My husband and I have just recently achieved our long-time goal of buying a foreclosed house, turning it into a rental property and creating a steady stream of income from the monthly rent we collect (at 17 percent profit on the initial cash investment every year).
After you identify a few houses in your chosen location or size range, research each offered property’s sales and tax history, as well as its current assessed value on the County Property Appraiser’s website, which are all public record.
Once you hear this number you will need to evaluate on the spot whether purchasing the property is financially feasible given your cash budget, current market conditions, the research you did on the property and your personal criteria and plan for the investment.
Our county publishes a twice-weekly list of the properties to be sold at the foreclosure auction held each Tuesday and Thursday at 11 a.m. A large portion of our time each week is spent physically viewing the properties and researching them online or in the courthouse books.
Next, research each property owner (also listed on the County Appraiser’s property record page) online via the County Clerk of Courts Public Record Search because whatever that the owner owes regarding that property outside of the loans (liens, back taxes, etc.), you will owe when you purchase a foreclosure home.
Instead, you need to start the bidding at the acceptable opening bid amount for each property, which is the lowest amount the bank is willing to accept for a property at the auction that day.
People get the idea they can buy a house at auction for $100 because they have heard that someone “bid on behalf of the plaintiff (the bank) for $100.” But auction buyers cannot counter the bank bid at $150 dollars.
Auction.com’s business model is to sell some properties in-person at foreclosure auctions and other properties solely online.
I’ve attended some in-person foreclosure auctions, to watch how the game is played, as well as watching online auctions on Auction.com and Bid4Assets.
I knew that auction.com would add a few minutes to the closing time if there was a last-second bid, but I also figured that the other bidder(s) were using e-mail as a notification, and the e-mail wouldn’t go out until after the auction closed if I waited until the last minute to place a bid.
I’m glad your auction was a success! I’ve read reports online of people winning the auction but the bank refusing the offer – basically de facto, unstated reserve prices.
We snagged a great deal on the property through the foreclosure auction website, and I’d certainly buy a rental from a foreclosure website again.
When properties are bought and sold through auction.com, the seller has 15 business days to accept the price.
Did it take 15 days for auction.com to notify you the bank accepted your offer, or did auction inform you it was accepted and then it took 15 days to get signed copy of contract from bank.
The representative wanted to confirm that I knew that it was an all-cash auction and that the property was being sold “where is, as is,” with no contingencies.

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