Buying a foreclosure house is a careful process and can sometimes feel like a full-time job. There are several pitfalls someone can find themselves in. However, if you follow these steps, you’re less likely to fall into the various traps. Here is how you should buy a house at a real estate auction.
Search for and file for properties.
Houses go fast in an auction setting. Some people are purchasing a house to live in while others are searching for a quick turn on profit. You need to remain updated on the current listings and act as quickly as you can. It’s important to find a system to keep track of these properties so you can check up on them at a later date.
During this first step, you should look at the house. Drive by and consider the condition. Many houses may be unkempt or in an undesirable neighborhood. If you can, speak to the owner about the property or with a neighbor to more accurately assess the auctioned house.
Confirm the facts.
Most houses end up at auction for two reasons: a tax lien or a foreclosure. The owner of the house has a chance to stop the auction, but this is only done by paying the amount owed. The house that you’re looking at may be off of auction so it’s important to confirm the auction status of any house.
The auction house is held at a public place in the same county of the property. To get this information, simply speak to a trustee or the county clerk. Be sure if you call the county clerk to clarify the location of mortgage foreclosure auctions and not tax foreclosure auctions.
The bidding procedure can be different based on your state, so you should also understand this process. In some states, bidders are required to pay the full amount in cash or with a cashier’s check at the auction itself. Other states are only required to bring a certain percentage of the bid amount with the rest paid within a certain time frame. Sometimes, you’re able to get this information from another person, but the best way is to educate yourself on the process. Simply read your state foreclosure laws.
Be aware of the price.
You should find out as much as you can about the property. This includes the estimated market value of the property itself. You should also find out if there is money still owed on the property as well as any other liens against it. This is public information and will require some research. Many houses, after all of the fees, end up being more expensive than it ought to be. A $300,000 house can run close to $400,000, which may or may not make it a deal.
These facts are important because any liens or fees on the property transfer to the winning bidder of the property. If you’re having an issue finding out if there are any liens on a house, try to contact a real estate attorney or title company to check for liens.
Bidding at the auction.
Call the trustee the day before the auction to check its status. If all is good, arrive at the auction early. You may consider speaking to the auctioneer or taking cues from other participants. Remember the price you set for yourself and bid away.
Obtaining the property.
If you won, you need to make sure you have the necessary documents from the auctioneer to verify your success. Clarify the next steps with the auctioneer and a real estate attorney. Some states allow a winning bidder to take ownership immediately or within a few days. However, some states require a month or more for the sale to be confirmed by the courts. Other states even have a redemption period where the owner can purchase their house back if they pay the full amount you paid at the auction. Be sure of these laws so you avoid issues in the future.