Buying a foreclosed house on auction is a fantastic way to get a really good deal. In fact, many real estate investors use this method as a way to purchase a house to rent, sell, lease purchase option or live-in. You may find yourself a nice house to live in for a great deal, or you might find yourself at the start of a lucrative real estate investing career. No matter what you decide, here are the four steps on how to buy a foreclosed house from auction.
Consult a Lawyer Who Deals with Real Estate Transactions
Auctions can be a tricky way to purchase a house as opposed to approaching a distressed owner and simply offering what they owe. If this is your first time, you will need fine print type legal tips, preferably from an experienced foreclosure lawyer. They can teach you how to see things you have not budgeted for, like back property taxes. Do not retain the lawyer though, because they will just be another unanticipated cost. In most cases, a free consultation will give you more than enough help.
Research Property Auctions in Areas of Interest
You can call the bigger real estate firms to see if they have any friends at the banks throwing them a bone to advertise for a commission fee. The best method of researching and putting together a top three list is by doing the following:
- Search North Idaho foreclosures for sale on our website.
- Read the newspaper sections under "auction" and "Real Estate" for upcoming foreclosure auctions.
- Look under the same categories on websites like Craigslist and Backpage for the same info.
- Contact both auctioneers and auction offices and make inquiries about real estate auctions to find out if they are holding any. Then, get as many details about the properties ahead of time including questions you would ask if you were buying a normal house, and follow those up with how much is left owed on the ones you are interested in and find out the property tax situation.
- Drive around and look for empty houses announcing an upcoming auction.
Research Properties of Interest
Unless you plan to demolish the house, never bid on a property blind. Take some time to research the property itself:
- Perform a title search. This will inform you of any hidden mortgages or liens against the home.
- Examine at the property in-person. You usually can’t tour the inside of a foreclosed property, but the home’s exterior and the condition of its yard will usually suggest at the state of the interior.
- Look at prices of similar homes for sale in the area. This will give you an idea of how much can be reasonably spent on the property.
Attend an Auction, but Don’t Buy In
This is a practice run. Familiarize yourself with the rules of the auction, especially what the auctioneer charges for winning bid. If you win the property, a fee in addition to the sale goes to the auctioneer, which is fair because this is a way to get a home for pennies on the dollar even if it is benefiting off someone else’s financial misfortune. Also, this is a good chance to learn how the auctioneer calls for the bid and how a bid is recognized. Do not skip this practice run. Auctioneers and other bidders, who are usually real estate investors, will not take kindly to your amateur hour.
Visit a Mortgage Lender or Bank Before Going to Auction
Once you’re ready to go shopping at auction, you need to get pre-qualified for a mortgage or other type of loan. This will give you an idea of how much your realistic maximum bid will be. Of course, if you’re going in with cash in hand, you can skip this step.