I get asked the question frequently… what’s one of the best ways to buy a foreclosed home at auction?. Well I am not an lawyer and the process is different from state to state but I can give you some common pointers. Let me start by saying there are actually two sorts of auctions. The first sort is the court house steps auction, this auction is held before the bank takes the house back. The second sort of auction are the ones you see advertised on TV, newspapers, etc. At these auctions the bank has already foreclosed on the house. Lets check out both type.
The first type of foreclosure auction is many times referred to as the court house steps auction. Now in many instances this sale is not really held on the court house steps but inside the court house building or many times in an attorneys office. However places such as Phoenix, AZ really do have these auctions outside the court house each week. There are several dangers when buying at this kind of auction. One is you normally can’t inspect the house before hand and two, you might be evicting a tenant or home owner if you are the profitable bidder. Not a very pleasant process. If nobody hits the reserve bid this is when the lender is the winning bidder and actually takes the house back. As soon as this occurs they will promote the house in one of two methods, either by a brokerage/listing agent by the MLS or via a second sort of auction.
The second type of auction is the kind you see advertised on TV, newspapers, radio, etc. These properties have already been taken back by the lender as in the instance above. The benefit of buying property at this kind of auction is your not doing any evictions and most often you can inspect the property. The biggest down side to this is there are normally many bidders on a specific home. Many of these bidders are inexperienced and within the heat of the moment many of these properties get bid up and purchased for greater than they are actually worth. You also have to have cash (or hard money lender which is a whole new topic).
You can get good deals at both sort of auction however the prospective buyer actually must do his/her homework. Many individuals go in blindly and purchase a property only to realize they didn’t get a great deal. As with anything the ones who do there due diligence and put in the effort are the ones who get the nice deals. Be aware that this process does require a good period of time if you wish to be profitable. You MUST commit the time to educating your self when shopping for property at auction, if you can’t, DON’T purchase at auction.
Ken is a Realtor within the Phoenix region and specializes in Trilogy Power Ranch homes and other Arizona golf communities
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