Depending on which state you do your investing in, foreclosure auctions can be a great way to obtain properties. If you watch one of the many real estate shows on TV, you may feel that you have a sense of how the process works. While that concept is the same from state to state, the exact rules and procedures can often change from state to state. While foreclosure auctions can be very exciting, the goal is not to get a rush, but rather to get a property that you see value in at the price you desire.
Before you think about attending any auction, you need to brief yourself on the local foreclosure rules and how the auction itself works. It is a good idea to check one out for yourself before you actually consider making a bid on the property. All bids are binding, so you don’t want to try to learn on the fly. Some auctions are at the property, while others are at the courthouse. Some may even be at another disclosed destination. If you run a quick search of foreclosure auctions in your area, you should be able to find a number for the predominant foreclosure attorney that handles the auctions. Review any and all information they send and find out the answers to any questions you may have before you consider doing any bidding.
Once you feel confident that you know the process and are comfortable with it, you can start your research. Some auctions will only be for one specific property, while others will do a number of them at once. It goes without saying, but if you are going to do any bidding you need to know as much about the property as possible. You will not be able to see the interior of the property, but you should know everything about the area and the exterior condition. It is not always the case, but it is a safe assumption that the property will need some type of work to get it to top market value. Since the level of work is unknown, you should give yourself enough cushion in your bid. That way, if the scope of work is greater than you may have thought, there is still room for profit.
The more you know about the property, condition and area, the more confident you will be in your bidding. If you do not have an idea of what some recent comparable sales are, you are just bidding and hoping you can make money. This is not what auctions are about. You should have a predetermined number in your head that factors in the market, work needed and a cushion in the event that things go wrong. The auction can seem like a blur and happen pretty fast if you are not prepared for it. Once the bidding starts, you may feel like you are in completion with everyone to win the property, but it is important to remember that you are trying to get a good deal and not just be the highest bidder. If you see yourself go over your maximum bid amount, it will be difficult to turn back. It is usually the most disciplined investors that will get the best deals.
Simply raising your hand and agreeing to a price will not make you the owner of the property. You will need a designated amount of funds in your account or a certified check available at the auction. Some auctions will give you 24 hours to make a payment in full, while others will demand the full amount at the time of the bidding. It is important to find out how much money is needed at the auction before you do any bidding. The deal is not complete until you provide these funds, even if you are the highest bidder. The money may be in your account and ready to go, but if you don’t have a check for the amount due, all of your work will be for naught.
Not every auction will end up with you buying a property. This doesn’t mean that you can’t get something out of it. Each auction is a great way to network with fellow investors or attorneys that can provide you with deals down the road. Instead of viewing everyone at the auction as your competition, you should think of them as potential partners down the road. If you can make one good contact that you can work with in the future, it may be more beneficial than actually getting the property. Just because you are at the auction doesn’t mean you have to bid. Moreover, just because you bid doesn’t mean you have to make every attempt to win the property.
A foreclosure auction can be a great way to get properties at a discounted price if you know what you are doing. You need to spend time before you bid. Know everything you possibly can about the process and the property itself. It looks easy enough on TV, but there is a lot of work that goes into determining the right property to bid on and the right price to bid. The number of foreclosed properties has dropped in recent years, but there are still good deals to be had.
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