Question from
reader: How do you buy foreclosures at auctions?
Answer: In our area,
the same group of investors attend every
courthouse auction. They seem to have an
agreement: any new bidder gets discouraged by the
group bidding the price up when the "newbie" bids.
When the new investor makes no bid on a property,
the buddies don't bid against each other.
However, everything is
changing in the new market. Foreclosures, on the
rise in many parts of the country, may be a great
way for you to pick up a bargain property. Here's
how to do it.
Buying Foreclosure
Properties at Auction
by Jeanette Fisher
One of the best known, but least understood, ways
of buying foreclosure properties is to buy them at
a live foreclosure auction. Depending upon where
you live, a foreclosure auction will generally be
held either at your county courthouse or in some
other public place. Sometimes the auction will be
conducted by the county sheriff and sometimes by a
proxy appointed by the court. Regardless of who is
chosen to conduct the auction, the result is the
same: the property is sold to the highest bidder.
The first bid is typically made for the
foreclosing lender by whoever is representing that
company. The bid will generally be for the amount
that's owed, although there doesn't have to be any
actual exchange of money involved. If no one else
puts in a higher bid, property ownership reverts
to the lender.
In the majority of cases, no one shows up for the
foreclosure sale except the proxies for the lender
and whoever may be running the auction. That's
especially true if there's no room for profit
between what's owed and the market value of a
property.
Make no mistake: foreclosure auctions aren't
generally places for beginning investors, because
you'll need access to either significant amounts
of cash or a large line of credit that you can tap
into quickly. If you have either of those
resources at your disposal, you can sometimes find
great buys at foreclosure auctions, but you have
to be careful, because most of the time the amount
owed doesn't leave much room for profit, if any.
The properties that do contain a significant
amount of room for a profit are most likely to be
attended by a bigger group of investors. The key
is to do your homework well, because a mistake can
be very costly.
If you want to check into auctions yourself, the
first thing you have to do is find out which
publication is used to list them. Often it's the
legal section of your local newspaper, although
some larger cities use specialized business papers
to advertise foreclosure sales. There are also
various services that will notify you of
foreclosures in your target area if you subscribe.
If you happen to be interested in a particular
property, you can contact the firm in charge of
the auction for information about the time and
place of the auction. Call the day before the
auction to see if the defect has been cured or the
sale has been delayed for some reason.
Always remember, if you bid, you must follow
through with the purchase. There's no turning back
once you've committed to buy a foreclosure
property at an auction. So do your homework. It
would be wise for you to choose a few target
neighborhoods and specialize in those areas, so
you'll know how much profit is available even
before you consider bidding on a certain property.
Although it's rare, you can occasionally find some
great deals at foreclosure auctions. If nothing
else, you'll find it educational just to attend a
few, just to see how the system works.
NOTE: Government-owned foreclosures have an
entirely different bidding system. See
How to Buy a HUD Repo
Jeanette Fisher teaches beginning real estate
investors how to make money in any real estate
market
fixing and flipping houses.
Copyright © 2006 Jeanette J. Fisher
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How do you buy
foreclosures at auctions?
