With the way the housing market has been this last year, you’ve probably been seeing many advertisements for foreclosure auctions. These are the homes that have been left unoccupied by their previous owners after a failure to keep up with the mortgage payments. The creditor or bank is trying to auction off the property to get the most money for the home as quickly as possible. Here are some tips and steps to follow if you’re interested in bidding on a home at an auction.
1. Find the properties you are interested in. You can often find information about an auction being advertised in the newspaper with links to online info and pictures. You’ll also see advertising online. Once you have determined interest in a property, you’ll want to drive by to see it in person. You might also get a lot of information about the home if the owner is still around or a neighbor that lives nearby. This could help you determine a bid later or even possibly work out a deal with the owner to keep them in the home and use it as an investment property.
2. Confirm auction information. It’s extremely common to have auction dates change as many as one, two, or three times. The dates and times can change last minute if the owner gets extensions. So make sure you don’t go assuming it’s still on and hasn’t been postponed unless you confirm prior to the auction. Most auctions take place in the county the home is located in. It’s equally important to figure out ahead of time how the bidding works and what you need. You’ll need your money in advance either in cash or cashier’s check. Find out the rules of your state here. In Illinois, the opening bid is determined by the lender and is usually the amount owed to the lender on the home.
3. Find the market value. You definitely don’t want to go into the auction blind. You’ll want to determine a fair market value for the home and for this, you need to do your research. Contact your local Realtor to get recent comparable sales information. You can also check on liens on the property through the county courthouse (these are public records). And if you happened to meet the owner when you drove by, they can tell you how much is still owed on the home. Tax records can also help determine when the property was last sold and for how much as well as the amount of the initial loan. All of this paperwork is filed with the county every time a loan is taken out against it.
4. Determine your bid. Find out what needs to be brought to the auction in terms of money – whether it’s a percentage of the winning bid or the entire amount. That will also help determine if you’re able to bid. Know that a deposit that you put down is often nonrefundable if you cannot obtain the full amount by the deadline if you win. You’ll want to know the highest you’re willing to pay because first time buyers at auctions can often get caught up in the auction process and compete in a bidding war. If you’re worried about this happening, bring someone with you to remind you of when to stop.
5. Make your bid. Watch other participants on a home you’re not interested in to see how it’s done. Many investors make auctions routine and bid at several in a month so they are seasoned pros. If you are a winning bidder, get the necessary information from the auctioneer confirming you have won. Clarify with them about what else needs to be done prior to taking possession of the property. Some states require the winning bidders to evict the owners themselves. So make sure you learn everything that has to be done.
While this process can be intimidating at first, it’s also a great way to get a house at a bargain, and can be perfect for a new or seasoned investor. Click here for more information and visit me online if you have more questions.