The recent economic crisis has caused a record number of foreclosures. Houses are up for auction all over the United States. At foreclosure auctions, houses may sell at a fraction of their market value. Bidding at a foreclosure auction may not be the answer for everyone looking for a home. Many auctions require a large cash payment at the time of purchase. You generally can’t get a mortgage prior to an auction because your bid might not win.
For people with excellent credit ratings and a reasonable amount of savings, auctions can be the perfect opportunity to snap up a house they otherwise couldn’t afford. Lenders may or may not set a minimum bid depending on the amount owed on the loan and how motivated they are to divest themselves of the property. Some current foreclosures are actually worth less than the amount owed on the loan.
For starters, check bank listings of foreclosed properties and participate in foreclosure auctions. You can try online tools that will help you search for cheap foreclosed homes in the different parts of the country. Currently foreclosed properties are cheapest in Cleveland and foreclosed rundown houses are being sold dirt cheap.
Keep in mind that many foreclosed properties may need work. The laws that apply in most real estate sales don’t apply to foreclosure auctions. Houses that are sold at auction do not need to be habitable and do not have to meet codes. However, before you can move into the house you will have to bring it up to code. Finding a lender to finance a foreclosure sale may be difficult. Generally you can save money by buying a foreclosure, but you need more money to buy one.
If you can’t qualify for a foreclosure sale, your real estate agent may be able to arrange a short sale. In a short sale, the bank agrees to allow the seller to sell the property for less than the amount of the loan. In this way, homeowners can avoid foreclosure. It is much easier to get a standard mortgage for a short sale than for a foreclosure auction. This is more like a standard real estate transaction and the owners are usually still living in the home.
On the other end, buying foreclosed homes in a public auction is entirely different from dealing with the beleaguered homeowner. During an auction, the lender yields to the highest bid and if you have won the bid, be prepared with the cash equivalent of ten percent of the winning bid amount and present proof of financing. During the bidding you are buying the house as is. If it needs repairs or a major overhaul, you have no option but to spend more money house improvement.
There’s the problem of the previous homeowners still staying the property. Once you buy the house during the auction and the tenants have not been evicted, it falls on your shoulders to get them out of the house and this can be a big headache. Or perhaps the house has been vacated but ‘mutilated’ by the previous tenants thereby draining your pocket for additional repairs.
For those with good credit and enough cash for a down payment, the real estate auction can offer real values. While not for everyone, real estate foreclosure auctions can save new homeowners lots of money and they offer a certain amount of excitement and suspense as well. Remember not to exceed your highest pre determined bid, or you won’t be able to pay for your house if you win.
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