Not only are more homeowners having problems coping with higher mortgage payments, but rising unemployment is adding to the growing number of foreclosure filings nationwide as people lose jobs and fail to keep up with mortgage payments.
For homebuyers looking for bargains, these developments could offer opportunities to purchase bank-owned distressed properties at affordable prices. The properties are foreclosed on after going through a foreclosure process that gives the homeowner a chance to reinstate or redeem a defaulted loan within a timeframe specified by state statute. If the homeowner does not reinstate or redeem the loan, the property is put up for a public trustee’s sale or sheriff’s sale, usually on the courthouse steps. The opening bid at this sale is typically set at the amount owed on the property. If no bidders purchase the property at the courthouse sale, then the bank takes possession of the property and can try to sell the property to recoup its losses.
Many banks are turning to auction companies to help them sell their foreclosed properties in a more traditional auction format (not to be confused with the courthouse sale, which is a state-mandated part of the foreclosure process).
INSPECT PROPERTIES PRIOR TO AUCTION
Bank-owned properties offered at these foreclosure auctions are sold “as is,” meaning the buyer is responsible for any and all repairs. This means inspecting the property before the auction is critically important. Contact the real estate listing agent or auction company to schedule an appointment to inspect the property. Drive around the neighborhood and look at the quality of the community. Also, talk with adjacent property owners and get as much information about the neighborhood and the previous homeowners as possible. Walk through the house and determine in writing how much it will cost to repair the property. Add the repair costs to your auction bid.
View real estate trends in your area to help determine the market value of a property.
READ THE FINE PRINT
Carefully read all the terms and conditions of the foreclosure auction before attending the real estate foreclosure auction, especially any fine print. This information can usually be found in the auction brochure or on the company’s website. If you’re not sure about the language in the terms and conditions, have your real estate agent or attorney explain it to you. Make sure you understand the bidder eligibility, financing, deposits, closing deadlines, closing costs, purchase agreements, disclosures and other bidding requirements. You will be legally bound by these contracts so make sure you understand them.
After inspecting several properties and narrowing down your short list of homes, investors and homebuyers should secure financing. While many live auctions have lenders available onsite, it is a good idea to have your financing prepared in advance of the auction. If you can’t secure financing on a property within the required timeframe, your deposit payment will be lost.
Many auctions — both online and live — require bidders to register either onsite or online. If you are bidding at a live auction, make sure to arrive early to get a good seat and to give you time to prepare for the auction. Check the auction company’s website before you attend a live auction and make sure the properties you are interested in bidding on are still available. Sometime foreclosed homes are sold prior to the auction.
During the live auction registration, the auction company will give you a bidder card with your registration number printed on it.
AT THE AUCTION
Live auctions move fast. Unlike tax sale auctions and trustee auctions on the courthouse steps, homes on the foreclosure auction block have been seized by lenders who have cleared the title of all outstanding liens.