Buying foreclosure homes is a great way to make fast (and often very large) profits in real estate. One method of buying foreclosures is to bid on them at the foreclosure auction. You can get deep discounts at foreclosure auctions, however, you will also need to pay cash for the property. The laws vary as to when you must come up with the cash. Some states allow you 30 days before you must go to settlement on the foreclosure home. Other states give you less time. Be sure to check the foreclosure laws in your state before bidding at a foreclosure auction.
If you opt for buying foreclosure homes at auction, here are some tips for maximizing your success:
Keep in mind when buying foreclosure homes at auction: Auctions can be over in a matter of minutes. If you arrive five or ten minutes late, you may miss the auction altogether.
Check the condition of the property in advance
Buying foreclosure homes can be profitable, but only if the property won’t drain you of resources. When buying foreclosure homes, the less you know about the real condition of the property, the more conservative you should be with your refurbishing estimates.
Think about what you’ll do with the property if you win the bid
When buying foreclosure homes, knowing what you’ll ultimately do with the property should influence how much you bid. No matter what you intend to do, one suggestion when buying foreclosure homes is to consider what price you would need to pay if you had to quickly resell the property.
Be prepared with the right amount of cash
An important thing to remember when buying foreclosure homes: Your bid is final – you won’t be able to back out. Set a limit on what you’ll bid, and go no higher. Find out beforehand how much money you’ll need on the day of the auction if you win the bid. You’ll usually need 10% of the bid, with the remainder due within 30 days. In some states, however, you’ll need the entire amount on the day of the auction.
Understand how the auction is run
Buying foreclosure homes at auction requires familiarity with how the auction is run. The foreclosure auction usually takes place at a public location such as a courthouse, and is usually run by an attorney that has been hired by the bank.
As with any auction, the property goes to the highest bidder. Sometimes, no one attends a foreclosure home auction and the only person there will be the bank’s attorney. Buying foreclosure homes at auction is only worth the bidders’ time if there is a good deal of equity in the property.