How to succeed at a foreclosure auction
Looking for a foreclosure property? You’ll want to know how to find a trustee sale (aka foreclosure auction), where the trustee of the mortgage is making the property available for sale. Here’s how to find foreclosure auctions in your area, as well as what to expect from such undertakings.
Foreclosure auction tip No. 1 – Finding the auction
To begin with, you have to know where to go to find foreclosure auctions. Online services like LPS Agency Sales and Posting tend to list many trustee sales based upon locality. Locally, city halls or similar official local government buildings will list foreclosure auctions.
Foreclosure auction tip No. 2 – Understanding the flow
Once you’re at a trustee sale, the auctioneer will read all foreclosure listings that were canceled or postponed. If banks work out a short sale or decide to modify a loan, a house gets taken off the market. This can happen as late as the date of the trustee sale, so pay attention. Once those addresses are done, the actual homes for sale are divulged.
Foreclosure auction tip No. 3 – Show them the money
In order to become qualified, bidders must prove to the auctioneer that they actually have money before they can place a bid on a property. As such, you must have a cashier’s check in hand that will sufficiently cover a bid. Think hundreds of thousands of dollars in cashier’s checks. Flash the checks and an auctioneer will approve you for foreclosure auction participation.
Foreclosure auction tip No. 4 – Bidding excitement
Generally, the first bid on a property will be a penny over the opening bid given by the auctioneer. Subsequent bids traditionally come in $100 to $500 increments until the house is sold. The winner will fill out paperwork, and the buyer gives the auctioneer a cashier’s check that at least meets the winning bid amount. Overages are refunded later. Expect the bidding and paperwork on a property to take about 10 minutes on average.
Foreclosure auction tip No. 5 – Pay cash and save
Buyers who use cash to pay can typically expect to save 25 to 30 percent off market price at auction. For instance, it is possible to get a $200,000 property for around $158,000. There is a risk, in that the auction winner isn’t necessarily able to inspect the inside of the home before purchase. Plus, the winner is responsible for liens like back taxes or unpaid utilities. You’ll need something extra to take care of all of this.
Foreclosure auction tip No. 6 – Eviction unhappiness
Ready to evict the former owners, winner? While it won’t always happen, there are many situations where the former homeowners are clinging to their property. There are also many scenarios where repairs will be necessary before the property can be rented out or resold.
Foreclosure auction tip No. 7 – Do your research
Many listings at a trustee sale will not be sold. Know the market price on homes in the area so that you aren’t suckered into bidding well above what the market dictates. Properties that don’t sell will typically go back on the market for another foreclosure auction, so track which properties have been there before – opening bids will be lower. In general, buying a house via a trustee sale is more transparent than buying from a realtor, as bids are known and there isn’t as much competition. If you’re going to need a loan to buy, however, foreclosure auctions are less than ideal.