Purchasing property at an auction would be the riskiest, but potentially most rewarding way of investing in real estate. You can discover deals for 70 or 60% of their market value, but you might also spend more than you ever wanted to and get a terrible property in severe need of repair. Properties market in foreclosure auctions when owners cannot pay their mortgages or when banks, government agencies and other large organizations want to unload their real estate portfolio fast and inexpensively.
Arrange your financing before you begin bidding. This can help you understand how much you are able to spend, which will restrict your selection of properties. If you are using your savings, this is only going to require a glance in your bank balance. If you are borrowing the money, get preapproved for a mortgage. Some auction trustees require you to get your bidding amount in cash or at cashier's checks at the auction.
Search for a suitable property. What’s appropriate will depend on your own motives for purchasing real estate. If you are purchasing for an investment, then you need to look for real estate that will provide the best return on investment. If you are trying to find a home to live in, your personal taste and preferences are, obviously, more important. Online real estate companies offer listings of real estate sold at auctions you can search by location, price and number of bedrooms (see Resources). The auction advertisement or foreclosure listing should provide you with the date, location and time of this auction.
Do your homework prior to bidding. Find out more about the foreclosure and auction laws of your nation. By way of instance, California doesn’t have a redemption period, and auction sales are final. But some states like Alabama have a 12-month redemption period after a foreclosure auction sale. This means the former homeowner has annually to cover the auction cost and maintain his home.
Inspect the property before bidding. Don’t trust the property details and description on the auction catalogue. Stop by the area, talk to the present owners. You will not be allowed to perform a full home inspection or a name search on the property unless you already did it until the foreclosure notice of sale has been registered.
Check for any tax obligations and second mortgages on the property before bidding. The IRS can redeem the home even after the auction sale if taxes are owed on the home. Contact the county tax department in which the sale is taking place for all these and other details on the home (see Resources).
Appraise the real estate's value by comparing the selling prices of comparable properties in the region. If you are a newcomer to pricing property, hire a real estate agent to give you her expert opinion. This can help you decide what your highest possible bid for the property should be.
Attend the auction and bid on the property you researched. Don't move over your maximum bid. If you are the highest bidder, the trustee will transfer ownership of the real estate for you.