As of December 2017, 31.6% of all repossessed properties are available for bidding in auctions. This is based on the data provided by RealtyTrac, one of the websites known for tracking data and statistics about home trends, particularly foreclosures.
What are Foreclosure Auctions?
In case you’re wondering, an entity (either a county sheriff, bank, or the government) will initiate foreclosures auctions to sell foreclosed homes at a price which someone is willing to pay. Normally, bidders will have to place their bids in the hopes of acquiring the property at their desired price. However, compared to normal foreclosure listings, the buyer should purchase the properties with cash, thereby limiting the buyer pool.
The state laws will regulate each auction. However, the representing county where the foreclosed property is located is the one to dictate how the auction works.
The sheriff, trustee, or clerk of the court will then award the property to the one with the highest bid. The auction is available to the public so that participants and other potential bidders will know the current offers.
The Auction Process
During an auction, the lender will place a starting bid on the property. The amount is often equivalent to the interest, remaining loan balance, and any extra fees and attorney fees that normally come with the Trustee Sale. In the event no one bids higher than the starting bid, the attorney will purchase the property for the lender.
In such case, the property is considered Real Estate Owned (REO). This normally happens because most properties placed in foreclosures auctions have a lower value than the total amount that is owed to the lender.
Each time you buy a property during a foreclosure sale, all junior liens are cleared except for the property taxes. If you buy a REO or bank REO property, you will normally receive the foreclosed property with a clean title.
Some Tips to Consider when Entering Auctions
If you plan to take part in foreclosure auctions, make sure you know what you’re dealing with. Before anything else, study the rules and procedures before you register. Also, don’t forget to bring cash or check. Most of the auctions will require full payment once you win the bid. However, there are some that will require a minimum deposit and the rest to be paid within 10 days after the auction.
Before bidding, set your budget and don’t take part in bidding wars. This is often one of the reasons why most bidders end up having to pay more than the property’s actual market value. In the event that you win, head to the clearing desk to complete any paperwork and settle the payment. Afterward, collect the receipt then start to buy an insurance, post foreclosure notices, and rehabilitate the property.
Taking part in foreclosure auctions requires a great deal of careful planning and prior research. You can’t just place bids on a whim and expect to win. It’s quite easy to involve yourself in bidding wars. Make sure you don’t use your emotions when bidding and study the rules beforehand.