Before buying a foreclosed house at auction, it's important to know that most home auctions have a reserve. This reserve amount is the minimum amount the lien holder will accept for the sale of the home.
Before buying a foreclosed house at auction, it's important to know that most home auctions have a reserve. This reserve amount is the minimum amount the lien holder will accept for the sale of the home.
You're likely to encounter two basic types of home auctions. The first is an absolute auction where the home goes to the highest bidder without limitations placed on the bidding amounts. The second is an auction with reserve where the seller sets the minimum acceptable price for the property. In an auction with reserve, you will typically be informed that a reserve is in place before you bid. In auctions with reserve, the seller reviews the highest qualified bid, with the option of either accepting or rejecting the bid if it's beneath the reserve price. Typically, if the home does not get a bid that meets the reserve, the home becomes a real estate-owned (REO) property. The lender or government entity that owns it will put the property on foreclosure listings.
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A reserve price in home auctions can be market value, the amount owed on the defaulted home loan or a price determined by the property owner. Usually, the auction starts at a lower price to get buyers bidding. To compare a reserve price to the home's fair market value, you can research the property and comparable homes in the area where the home is located.
Before you are allowed to bid on a home at a foreclosed home auction, you often must prove that you have cash to make a down payment or buy the property the day of the sale. If you only intend to make the down payment, you must also show a financing pre-approval letter.
If you prefer to buy an REO property rather than go to an auction, click here to get free foreclosure listings from Reply! You can also look for foreclosed homes on lender's websites and the U.S. Department of Housing and Urban Development (HUD) Homestore website.