Property auctions take place after a property has been placed in foreclosure by a bank, lender or government agency. These properties have been places in foreclosure due to the fact that the owner has been unable to meet the repayment demand of his mortgage, his tax bill, has committed a federal offence and a variety of other less consequential factors.
One of the most enticing factors that leads investors to make purchases of properties at auctions is the fact that they are able to make a profit on resale. For home buyers it is a wise choice because they are usually able to afford something a little more than they would normally be able to afford and live in a greatly discounted home. In the US today more people are actually buying foreclosed or properties on auction, than they are making traditional real estate purchases.
As buying at property auctions is one of the more riskier ways of buying property, it is important that the home buyer knows what he is doing. I can’t stress the importance of educating yourself in the foreclosure and auction procedures enough. Homes available on property auctions are a matter of public record and can be found on the Lis Pendens at any county courthouse. Auction sale dates will be listed, so attend a few of these and get a feel for it before making a bid. Online listing services also specialize in information regarding property auctions so make use of as many of these resources as you can.
Property auctions generally require you to be able to present them with a 10% down payment on the bid in the form of a cashiers check, certified funds or money order. If you have ready cash available, I am sure they will accept this too, but who wants to carry a briefcase full of cash to a property auction? Certainly not me, unless I had a couple of body guards! You will be expected to close the deal within a period of thirty days and this means coming up with the remaining 90% balance on the price, plus taxes, closing costs and other expenses. Obtaining pre-finance is a way to cut to the chase and close the deal as quickly as possible. A home purchase at an auction cannot be made contingent upon finding a way to finance it.
What to do before purchasing
Property auctions are held at the County level on a “where-is” “as-is” basis, so it is important to find out as much about the property you have in mind as possible. This means trying to inspect the property, conducting title deed searches and finding out what outstanding liens have not been paid.
Three are thee auction methods used, the reserve auction, the minimum bid auction and the absolute auction. Find out about these methods and which one is to be used in the auction your short-listed property will be sold on. Be careful of the risks and pitfalls and you might just land yourself a beautiful, well discounted property.