Foreclosure Auctions
Understanding phases of foreclosure auction.
Reasons for foreclosure auction
- Failure to make home mortgage installment payments.
- Failure to pay real estate property taxes, assessments, personal bankruptcy, illegal activities by owners, etc.
Types of foreclosure auction
- Public auction
- Court auction
Here are some differences: In court auctions, you cannot: modify the contract terms; transfer the title; pay in installments; and ask for a discount for early payment.
Some auctions are done by verbal bidding and some others are done by sealed written offers.
Process of foreclosure auction
Foreclosure process is faster (about 3 months) in "non-judicial" states and slower (about 18-24 months) in "judicial" states where state courts are involved before the property is sold at the auction. Judicial foreclosure states are: Connecticut, Florida, Indiana, Louisiana, Maine, New Jersey, New York, North Dakota, Ohio, Pennsylvania, and South Carolina.
Auctioned foreclosure properties are "where-is" and "as-is." Make sure that you avoid some common foreclosure auction mistakes made by many. Foreclosures are generally auctioned off at the county level.
Be patient! Auctions are frequently postponed.
Foreclosure Auction Methods
- Absolute auction
- Minimum bid auction
- Reserve auction
Risks in foreclosure auctions
You can buy real estate at low prices at foreclosure auction, however you must be careful about the following:
- You may not be allowed to inspect the property fully especially if it is already occupied.
- You need to check liens and unpaid taxes on the property.
- You may experience difficulty in obtaining a conventional mortgage loan as the lender may not assess the value if inspection is not allowed. Sub prime lenders with higher interest rate may be your choice.
- Eviction may be your responsibility in some cases.
- You may not get a "clear" title.
Review factors that affect foreclosure home valuation so that you can set your maximum price right.
Payment terms under foreclosure auctions
In general, you need to present 10 percent of the bid amount in cashier's check, money order, or certified funds. You are expected to close the deal within 30 days by paying the balance of 90 percent of the bid amount, taxes, expenses, and other closing costs. You cannot make your purchase contingent upon financing.
Determine your foreclosure goals and your foreclosure strategy to concentrate on bank foreclosures or government foreclosures or pre-foreclosures.