Two types of properties usually end up in auctions: foreclosure auctions and tax lien auctions
In the case of foreclosures, if the home owner fails to pay the mortgage installments for several months the lending bank files a notice of default with the county registrar. If the borrower continues to default or does not re-negotiate the loan with the lender after the notice, the property can be repossessed and put up for auction. This is a time consuming process lasting several months or years.
The other type of auctions involves the properties seized by the tax authorities for default in the payment of local or federal government taxes.
The Auction Mechanism
- The auctions are held at locations notified by the concerned government agencies or the auction companies. These days the auctions are primarily conducted online.
- In an absolute auction the property goes to the winning bid. But a quailed auction requires the confirmation from the lending bank. The lender is not bound to accept the auction even if you are the highest bidder.
- The lending bank can fix the minimum bidding amount. Usually it is the amount of outstanding balance in the mortgage. Sometimes the minimum amount may be fixed even lower in order to attract bidders.
- In foreclosure auctions the lender is not allowed to profit from the auction. The lender has to refund the excess amount to the homeowner after deducting the outstanding balance, other liens and expenses.
Inspection of the Property & the Winning Bid
Often the auctioneers do not allow the inspection of the properties on auction. In such cases the potential bidders can drive by and see the properties from outside before the auction begins. Some auctioneers conduct open houses allowing the potential bidders to walk through those properties. The list of foreclosed properties in your area can be obtained from the county registrar’s office or website.
The winning bidder has to deposit the specified earnest money along with other required fees to the authorized staff of the auction house before leaving the auction site. The bidders seeking finance for their purchase should get it pre-approved, preferably with the presence of the financier’s representative at the auction site, in order to avoid any last-minute complication.
The Benefits and the Drawbacks
The real estate auctions afford a great opportunity to snap up some of the best property deals at very attractive prices, which may not be available to you at traditional channels. However, all properties that end up at auctions are not gems. They are the properties of homeowners already neck-deep in financial trouble. They may have been completely trashed for lack of resources for adequate maintenance. They may be saddled heavily with financial obligations like tax liens, contractor liens or secondary mortgages. Therefore, the bidders have to work closely with the auction house to ensure that the property in question has clear title.
Sometimes the property in question may be occupied by a squatter. Evicting the squatter may become an unpleasant task. It can even turn out to be a lengthy and expensive process.
Online Auctions
The online auctions of real estate properties, including foreclosed properties, have become a recent and well established trend. RealtyBid.com is a leading platform that provides the facility for online bidding. It has been conducting online auctions since 2001 using latest advances in Computers, Communications and IT Technology. The process is swift, less cumbersome and is cost-effective.
The website provides thorough information on the process of auction, the properties on offer complete with pictures.
Every month the RealtyBid.com conducts auctions with the offer of real estate properties, bargain homes and foreclosures to millions of online participants. The process involves real time competitive bidding and lasts short durations like one to three weeks.
The participants have to first register with the website, fax signed copies of verification documents. They may have to deposit through online credit transfer the required fees and earnest money before the start of the bidding process. The winning bidder may be required to complete the payments and the rest of the documentation in order to close the sale at the website’s main office or at any of its nearest branch office. Those who need financing of the deal may be required to make prior arrangement with the financier.
Jeff Adams, who has long been giving advice on real estate investment columns, urges us explore the potential that online auctions offer.
Auctions of Other Type of Real Estate Properties
Platinum Real Estate handles the auctions of unique and ultra-luxury properties. They maintain an extensive database of high net-worth global buyers. They keep excellent communication and relation with their clients. The auction house provides a convenient, uncomplicated and expedition platform to buy expensive properties for these high net worth buyers.
Treasury Department Auctions include real estate as well as other type of properties confiscated because of tax defaults or violations of federal law.
