How to Handle Foreclosure Auctions

Posted on October 20th, 2008 by saman

If you have decided to look through foreclosed homes and try to buy at an auction, there are some things to seriously consider. If you are beginner in this field be prepared for a tough battle. While most auctions normally end with the lender as the winner, these auctions are becoming more popular with everyday people with our current rise in foreclosed homes. It is now common to find rooms packed full of people bidding like crazy on these homes, so it will not be an easy win.

The lender has a high interest in the ending price because they do not want to lose a lot of money on the deal. They would rather win the property themselves than give it to you for half of what they are owed. You will need to know what is left on the foreclosed homeowner’s loan before walking into the auction. It is also a good idea to decide beforehand what your spending limit is and do not go over that no matter what.

Further, it is a good idea to have financing lined up before you even attend an auction. You do not have a lot of time to pay for the property if you do win, so you do not want to bid more than you can hand over in cashier’s check or cash within a short period of time. Even if you do get a great deal, you have to be able to pay for it quickly.

You may not be able to inspect a property before attending the auction, which can lead to a high risk purchase on your part. If there is structural damage or the previous owner added onto the home or did other construction without proper permits, you will be on the hook for all of those expenses. Even without checking it out physically, you do need to make certain you check into the title. If there are liens or back taxes owed make sure those expenses do not outweigh the savings you will get from the purchase.

It is a good idea to attend a few foreclosure auctions before going into one for a property you actually intend to bid on. Get a feel for how the process works and who else is in attendance. Get comfortable in those surroundings and be prepared to fight for the property without getting carried away and bidding higher than you are prepared to pay for that property.

Also realize that winning a foreclosure auction can get messy after the win. If the former owners are still in the home you could find yourself in charge of evicting them, which for many people is a very uncomfortable, sad experience. If you didn’t get to inspect the property prior to bidding there could be structural problems with the home that you will have to shell out more money to fix.

Bottom line, there is a lot of risk involved with a foreclosure auction that can be avoided by looking for a pre-foreclosure sale instead. There can be great savings in foreclosure homes if you are careful.