The real estate business is said to be a great source of income, but how do you actually go about bringing in a profit without taking on huge risks? Foreclosure auctions are often where many people find the deals that bring in their big profits. You have to get a low buy in and sell for much more in this market, so it is much like investing in the stock market. Buying from a foreclosure auction is a way to get the low buy in rate, but you have to use caution and know what you are doing.
Learn the Market
Although you could subscribe to online services that let you know when foreclosure auctions are going to happen anywhere in the country, you are asking for trouble buying property in a market you know nothing about. For example, a devastated area in Florida where the homes have been wiped out by a hurricane will not be a good market to invest in, but you may not know about this problem if you go on limited information from these services. It is best to stick with foreclosure auctions that are in specific locations that you are familiar with.
Smart Bidding
If you can contact the owner of the home before the property hits the foreclosure auction block, it is possible to buy the home before it gets that far. Usually, owners are given about a month to find a buyer. Most lenders appreciate these sells as they are preferable to auctions.
If things don’t work out, you can still bid on the auction. Once you locate property you are interested in, you must determine which realtor is handling the auction and find out the details, such as if you are required to show up or if you can call in a bid.
It’s not up to the owner of the property to let you know all of the gory details. Since laws about bidding on foreclosure auctions differ in each state, you have to acquaint yourself with your state’s laws (or the laws of the state where the property is located).
How to Determine Your Bid
In general, you might consider finding the estimated market value of the property and bidding around 20% less. Estimated market values are listedin valuation reports which are public record. Since you never know the major flaws with a home, it is a great idea to hire an inspector if you have access to the home before auction. Bargains at a foreclosure auction are great, but it can quickly turn into a nightmare if there are serious issues that will be expensive to fix.
Depending on the foreclosure laws in the state where the auction is taking place, you may have to pay for the property in full. Keep that in mind when determining your bid.
