Foreclosure auction refers to selling real estate at public auctions so banks can recover financial losses associated with the foreclosure process. While it is true real estate can be purchased below market value, buyers should take time to understand the process involved and engage in due diligence prior to placing bids on distressed properties.
A foreclosure auction usually takes place at a public location such as county fairgrounds and local courthouses, but can also occur at the property being auctioned. Public auctions offering multiple homes for sale allow buyers the opportunity to scout out potential deals.
Most foreclosure auctions are listed in the Classifieds or real estate sections of newspapers. Some are listed at realtor websites such as Realtor.com or RealtyTrac.com. Buyers can also contact the county Trustee, county clerk, or state real estate commission. When contacting government agencies it is important to inform the clerk that you are interested in foreclosure auctions as opposed to tax foreclosure auctions.
Tax foreclosure auctions involve selling properties which have outstanding tax liens. These types of foreclosed homes are sold for the amount of taxes owed. Two types of tax foreclosure auctions exist and include tax lien properties or tax deeds.
With tax liens, buyers pay the delinquent taxes and become a lien holder against the property. The property owner is given the opportunity to cure tax arrears along with penalties and interest. If the property owner is unable to pay the tax bill, the investor owns the property.
With foreclosure tax deeds, buyers purchase the property deed. A real estate transfer is required to record the new owner and the title is cleared of any outstanding liens.
When foreclosure real estate is placed for sale through public auction, the homeowner has one last chance to cure mortgage arrears and stop foreclosure. In some cases mortgage default can be cured up to 24 hours before the home is placed on the auction block. If property owners can satisfy their outstanding debt with the lender, the property will be removed from the auction listing schedule.
Bidding procedures at foreclosure auctions vary by state, so become familiar with the process prior to attending. Many real estate foreclosure auctions require bidders to register in advance. Some require bidders to pay the full amount on the property they wish to buy directly after the auction. Most require payment in cash, certified funds, or bank cashier check.
Other foreclosure auctions require bidders to pay a percentage of the bid amount and provide the balance of owed funds within a set period of time. Buyers generally compete with multiple bidders and must determine the maximum amount they are prepared to bid on foreclosure homes.
RealtyTrac.com provides a complete list of foreclosure laws by state. Those unfamiliar with buying distressed properties through auctions might want to attend an auction or two to see how the process works. Others prefer working with a real estate lawyer or foreclosure specialist to obtain accurate advice.
Another important step of bidding on foreclosed real estate is to determine the property value. This information can be found by searching public records through the county recorder's office. Realtor websites often provide listing prices as well.
Prices of foreclosed properties are based on the outstanding balance of the mortgage loan, along with penalties, late fees and legal expenses. Bids must be equal to or greater than the amount owed against the property. If no one places an appropriate bid the property is returned to the lender.
Buyers should check county real estate records to determine if auction properties have any tax liens or creditor judgments attached. Buyers are usually responsible for satisfying liens before taking possession of the property.
It can be easy to get caught up in the frenetic action of foreclosure auctions. Therefore it is crucial to stick to the maximum price you can afford. Otherwise you can end up spending more than you planned on a property that requires multiple repairs. Also keep in mind that if you submit a winning bid for a higher amount than you can afford you will lose the deposit placed against the property.
We invite you to learn more about buying foreclosure real estate and what to expect when attending a foreclosure auction in our foreclosure and real estate investing article library. Take a moment to subscribe to our mailing list to be notified of newly published information and stay abreast of changes within the real estate market.
Published on August 16, 2010 at 03:28 AM