If you live in or near a city, chances are, there’s an auction. Sometimes they happen daily. Other times, foreclosure auctions are a weekly event. I recommend you attend an auction to see how it works before you buy anything. Going into it, here are the top 6 things you need to know about real estate foreclosure auctions.
1. You need cash in order to bid and buy. If you attend an auction, you need to make sure either you or a partner has the money to place a bid or make a purchase. Only few online and tv advertised auctions have available financing.
2. You, him, her and ANYONE is allowed to bid at auctions. Some foreclosure auctions require a bidder’s fee of a minimum amount (i.e. $10,000) to prove you have money. You may have to arrive at an auction with a cashier’s check made out to yourself to prove you have money. If a bid is won, you have to sign over your cashier’s check and the remainder of the amount by the close of the next business day. The deed will come in the mail 2-3 weeks later.
3. Always know what lien you’re bidding on. A lien is defined as the legal claim of a person upon the property, of a different person to secure the payment of a debt or the satisfaction of an obligation. There’s money to be made in having a second or third lien position, but this can be an incredibly COSTLY mistake if you’re not doing it strategically. You do not want to inherit all the other liens on top of your bid!!
4. Research the properties! Before attending the auction, drive by the properties you’re interested in to get a good look at them and their context. This could save you from making a poor decision! Make sure you check the property condition, neighborhood, whether the property is vacant or occupied and not located on a major street or intersection. Don’t be afraid to knock on the door and see if you’re able to look inside.
5. Once you own a property purchased at auction, move quickly to secure the property. If the property is occupied, call your real estate attorney to start processing an eviction. Call your general contractor and start changing locks, boarding up windows and cleaning up. Do a walk through to assess what needs to be repaired and build a budget.
6. Pay attention to “Redemption Rights.” Check the laws in your state. Some states allow a homeowner to buy back the property within a certain period of time if they’ve lost it to foreclosure. You’ll want to be aware of this in regard to making repairs and spending money on a property that isn’t yours yet!
There is so much to know and learn about purchasing real estate investment properties through foreclosure options, but the above are just a few things to get your head in the game. If you’d like to learn more, ask about our Inner Circle where you can even attend an auction with me, and get the inside scoop you’d never know otherwise.