Tips for Participating in Foreclosure Auctions
One of the most unfortunate aspects of the recent economical downswing that the world has been experiencing for the past two years is the explosion of foreclosed properties that have resulted. The large amount of recovery homes has led to an increase in foreclosure auctions that almost always liquidates the home or assets for significantly less money than the investors originally sold for.
Participation in foreclosure auctions can be a good way to invest in real estate today. Purchasing a property for 50 – 75% less than its market value at a real estate auction can reap dividends in the long run. Keep in mind, even though, that many homes acquired through foreclosure auctions are not without their risks. Typically, these assets will require some degree of maintenance or TLC in order to bring it up to code. It has been estimated that as many as 50% of all foreclosed homes sustain some level of destruction or neglect by the inhabitants prior to vacating the premises.
This can range from minor lack of upkeep such as unclean appliances or overgrown landscaping, to major acts of sabotage or theft of vital items like furnaces, hot water heaters, copper piping, etc. When considering a property for sale as part of an estate auction, the key to avoiding what can turn out to be a very poor investment is to take the time and effort to investigate the house or property well in advance of the foreclosure auction in order to discover any potential pitfalls. While minor things needing immediate repair is not unreasonable given the steeply discounted price, it’s better to be aware of any issues that may linger.
Another thing that should be considered before attending foreclosure auctions is financing. Determine how you are going to pay for the property you bid on before you place your bid. Many foreclosure auction houses require payment within a specific period of time – usually five business days. Furthermore, most auction houses consider a winning bid to be a legally binding contract. If you successfully bid on a foreclosed property and are subsequently unable to purchase it, you may be subjected to legal ramifications.
Determine what you intend to do with the foreclosed property before you bid. Are you willing to invest in the necessary repairs in order to make it sellable? If you’re looking to rent the house out, it will have to meet certain requirements in order to be considered habitable. Check with your local laws and ordinances in order to determine what the existing instructions are. Buying a foreclosed home at a foreclosure auction can be a great investment. Just be sure to perform due diligence before committing to what can be either a really great or a really poor handling.
