If you’re thinking about buying a foreclosed home at house auctions, it’s not as simple as just showing up to the auction house and bidding. There are a few things that a real estate investor needs to know before walking into house auctions.
This guide will answer key questions about buying a foreclosed home at house auctions:
- How can I find public auctions near me?
- What can I do to prepare for buying a house at auction?
- How much should I bid when buying a foreclosed home at house auctions?
- How does bidding at an auction work?
If you’re a real estate investor interested in finding out these answers as well as a few general tips to make buying a house at auction easier, we’re here to help you!
“How can I find public auctions near me?”
Many real estate investors have no problem finding investment property listings, but they don’t know where to start looking for house auctions. There are a few places to turn to when considering buying a foreclosed home at house auctions:
- Look for house auctions in legal newspapers or the legal section of your local newspaper.
- Check out websites for house auctions.
- Visit your local courthouse for information about public auctions.
- Talk to mortgage lenders as they have lists of places for buying a foreclosed home at house auctions.
Something real estate investors should look for when buying a house at auction is the title “Trustee Sale” as many of the house auctions are listed under this name.
“What can I do to prepare for buying a house at auction?”
A real estate investor should do everything he/she can to prepare for buying a foreclosed home at house auctions. The first thing to do is to research and understand what exactly a foreclosure is and why it can be a great real estate investment opportunity. You should even be aware of the other ways of buying a foreclosure, in case you wish to explore your options beyond house auctions. Luckily, all of this information can be found in one place! Read “How to Buy Foreclosed Homes from Banks and Why They Are So Great” to get you started. Once you have all the general information on foreclosures, here is what to do next:
Know the laws about buying a foreclosed home at house auctions
This is very important, especially since the laws on buying a house at auction differ from state to state. For example, a real estate investor should be prepared to pay a sum for the investment property at house auctions. The amount varies: it could be the total price of the investment property or it may be a percentage. It could be paid in cash or cashier’s checks. Find out if there is a set time period to pay the rest of the sum.
Some states don’t reward ownership of the investment property to the real estate investor immediately after bidding at an auction. Your state might require that a court recognizes you as the owner of the investment property, which could take a month or more. Make sure that this time period doesn’t damper any of your investing goals when buying a foreclosed home at house auctions.
Find out the requirements of house auctions
Certain auctioneers or auction companies have special regulations that a real estate investor should know. Some charge a fee on top of the price of the investment property. Others require real estate investors to have a check made out to the auction company before beginning. Contact the auctioneer or the attorney involved to find out this information before buying a foreclosed home at house auctions.
Visit a few public auctions before buying a foreclosed home at house auctions
It’s a good idea for a real estate investor to visit a few house auctions before, in order to observe the process. There are different types of people who are always interested in buying a foreclosed home at house auctions, and it’s a good idea to get a feel for the kind of competition you’ll be up against. Study them beforehand, and watch as they bid, so you won’t be surprised or intimidated when you start bidding at house auctions. You can even try to get in touch with a real estate investor who has firsthand experience with buying a foreclosed home at house auctions.
Find out where the auction is being held
The location for house auctions tends to differ, so make sure you know exactly where the auction will be held. The house auctions are sometimes done at the location of the investment property, but not often. Other places include the local courthouse steps, convention centers, or the site of the auction company.
“How much should I bid when buying a foreclosed home at house auctions?”
There are a few steps a real estate investor should take when deciding how much to bid for a foreclosed investment property.
Investment property analysis
A real estate investor will most likely not be allowed an inspection when buying a foreclosed home at house auctions. However, that doesn’t mean you can’t drive by to study the exterior condition of the foreclosure and its location. Use any information provided by the listing as well to help determine the value of the investment property.
Real estate market analysis
Real estate comps will give you the best idea of the value of the investment property. Choose a few of them that match up in characteristics to the foreclosed home you’re interested in. This will give you a realistic market value when buying a foreclosed home at house auctions. In order to find real estate comps you can be confident in, visit Mashvisor for help with real estate market analysis.
This step is a bit difficult since the real estate investor can’t do a walkthrough. Once the value is determined from the last two steps, you can work from there. Repairs should be between 10%-25% of the value of the investment property. When buying a foreclosed home at house auctions, you want to take the worst case scenario for repairs. Make sure this doesn’t exceed your budget for buying a house at auction.
Rule of thumb when buying a foreclosed home at house auctions
The reason real estate investors love buying a foreclosed home at house auctions is that they can get away with paying less than market value for the investment property. As a rule of thumb, aim to pay 20% less than the real estate market value of the foreclosed home.
Perform all of these steps to find out what amount you should consider bidding at an auction.
“How does bidding at an auction work?”
The process for bidding at an auction is pretty simple and doesn’t take much time. If you follow the advice of observing house auctions before becoming a bidder, you’ll have a good idea. But for the sake of preparing you, let’s break down the process of buying a foreclosed home at house auctions:
- First, real estate investors will present their cash or checks to the auctioneer.
- The auctioneer will make any necessary announcements, like foreclosure auctions that have been canceled or postponed.
- The auction will start at a minimum of the mortgage owed for the foreclosed home plus a negligible amount (typically).
- Real estate investors will begin offering bids for amounts over the value.
- Once a real estate investor wins, he/she is taken to the side to fill out forms, and the bidding for other properties continues.
Tips for buying a foreclosed home at house auctions
Know what you’re getting into
Buying a foreclosed home at house auctions has its share of hassles. Real estate investors have to uphold house redemption laws: if the owner wishes to buy back the investment property in a certain period after foreclosure, you’re obligated to sell it back to him/her. Real estate investors buying a house at auction may have to evict the current tenants as well.
Don’t be late
House auctions usually don’t last very long, and a real estate investor who shows up even 10 minutes late could have missed out on the foreclosed home he/she had his/her eye on. In fact, some of the first few investment properties sell for less because real estate investors try to feel out price trends during house auctions. You don’t want to miss out if you’re lucky enough to have your investment property auctioned first.
Open your ears
The auctioneer’s announcements at the beginning of house auctions and before each bidding are important. They could bring up any liens on the property that a real estate investor could inherit.
Your bid is absolute
Follow the steps for determining how much to bid when buying a foreclosed home at house auctions. Once you place a bid, its final, and you can’t go back on it. Make sure not to bid over your set budget.
Don’t get caught in a bidding war
Real estate investors who are buying a foreclosed home at house auctions for the first time can get caught up in a bidding war. Avoid this no matter what is going on around you. You have a set price in mind for the investment property, stick to it.
Buying a foreclosed home at house auctions can be very rewarding for a real estate investor. Public auctions may be intimidating, but there is no need to avoid them just because you have no clue what house auctions are all about. Prepare as much as you can before bidding at an auction, and you might find it’s the best way for you to acquire your investment properties.