A foreclosure auction is a legal process that ensues when a mortgagee, other lien holder, or simply put, a lender, gets a court order to auction a foreclosed property.
This auction normally happens in the event that the mortgager, borrower or the property owner fails to pay off a certain balance of his loan amount to the mortgagee or lender in the required time period.
Buying a property at a foreclosure auction can turn out to be extremely rewarding, provided right research is carried out beforehand. Let’s take an overview of how a foreclosure auction proceeds.
The Benefits of Buying at a Foreclosure Auction
- Good Value for Money – Most people are unaware of this method of buying property and numerous others are intimidated by the concept. Hence, few bidders participate in such an auction and the property is usually sold at a lesser value than the actual.
- Zero Commission Charge – Buying a property directly at an auction implies no involvement of commissions, which means a direct saving of 6% in most of the states.
- Quick Possession – Usually, a successful bidder is entitled to property possession as soon as they obtain the trustee’s deed.
- Accessibility – Typically, such an auction is open for all for purchase of property.
Are There Any Risks of Buying at a Foreclosure Auction?
Like all other property purchases, there are certain risk factors involved.
- A bidder might bid more than the property’s real worth.
- A successful bidder might have to evict the property occupant.
- There is a possibility of existence of senior liens on the foreclosed property.
- The property could have physical faults or title defects.
More often than not, most of these risks can be minimized or purged with meticulous research and planning.
What Are the Steps Involved in Purchasing a Foreclosed Property?
- Property Identification – There are several reliable online portals with advanced search tools to make this aspect easy. A prospective bidder must definitely drive by the property after identifying it, albeit without disturbing the occupant.
- Value Estimation – Visit local taxing authority’s website or office to find out how much value has it assigned to the property in question. Also, watch out for recent property sales in the neighborhood of the foreclosed property to judge its approximate value.
- Title Condition Assessment – Ensure the absence of any liens or other encumbrances associated with the auctioned property.
- Arranging for Funds – Foreclosure auctions usually require immediate imbursement. If there’s a need to borrow, arrangements must be done well in advance.
- Bidding at the Auction – It is advisable to attend a few such auctions to get a feel of the process. Usually, foreclosing banks release the starting bid info days before the auction. This knowledge is great to have, as it indicated the lowest amount property will be auctioned for. Cashier’s checks or certified ones from the bank are a must to carry at the day of auction.
Jeff Adams is a leading foreclosure expert, counseling and guiding thousands of individuals for real estate related concerns. Bearing these aspects in mind will ensure a smooth sail through a foreclosure auction process.
