A review of some of the issues to be aware of when pursuing homes in foreclosure at auction
Whether you are a first-time homebuyer on a limited budget or you are looking to invest in real estate, foreclosure auctions can be tempting. Before you consider buying homes in foreclosure at auction, however, it is important to understand the potential pitfalls.
Although an auction can help you save money on a great house, you also run the risk of sinking a great deal of money into a house that is uninhabitable. By researching foreclosure auctions in advance, you can reduce the likelihood of a bad investment.
The rules for foreclosure auctions can vary dramatically from state to state and even from city to city. Before you register at an auction, it is important that you read all of the rules for the individual district or agency holding the auction. Look specifically at:
- The amount you will be required to deposit before bidding
- How, specifically, the auction will work
- Special provisions for online bidders
- The post-sale process
Generally, you can get all of the information you need at the tax office for the county in which the auction will be held. Real estate agents are also a good resource for details about foreclosure home auctions.
One of the biggest issues surrounding homes in foreclosure is the condition of the property. Unlike a traditional sale, there is a good chance you will not be able to check out the home in advance of the auction. When homes go into foreclosure, some homeowners stop taking care of the property, leading to serious structural issues. If you are not able to bring in an inspector before the auction, you may find yourself with more issues than you know how to handle.
If you are planning to sell a property after you buy it at auction, consider the potential resale value. Check into comparable properties in the area to find out about the value, and look at the prices of homes for sale nearby. When it comes to home auctions, foreclosures may have a negative impact on the potential selling price.
If you are planning to live in the home, check into the neighborhood and determine whether or not it is suitable for your family.
In some cases, you run the risk that the owner of a home in foreclosure may settle the outstanding balances with the lending institution even after the sale. To avoid this issue, check to see if your state has a statutory redemption period, which would allow the original owner to settle the amount owed. In that case, you will usually get your money back in the amount of the purchase price plus interest, but you will lose the property and future sale prospects.
If you're considering buying homes in foreclosure at auction, Reply! can help by putting you in contact with local real estate professionals today.