How Do Foreclosure Auctions Work Learn how to verify foreclosure auctions and laws, make bids and take ownership of properties.

The Foreclosure Process Normally, a property which is delinquent in payments for 90 days or more can be started through the foreclosure process by the lending institution A legal notice of foreclosure, Demand Letter, is sent to the owner If no response, the property is submitted to court for formal foreclosure proceedings

Scheduling & Advertising Property and home auctions must first be advertised An auction date is set after a period of advertising time which varies from state to state A Notice of Foreclosure is placed on the property & the owner has until the auction date to settle the delinquent loan amount to stop the auction

Auction Formats Minimum Bid Absolute Auction Auction with Reservation

Bidder Verification A bidder must provide proof of funds that they can pay for the property before the auction begins Cashier’s check for a deposit Pre-approved loan paperwork

Who Can Bid On Foreclosure Properties Most home foreclosure auctions are public Everyone approved by the trustee can bid Some auctions allow internet bids Some auctions only accept sealed bids Check county foreclosure auction by-laws for correct bid format

Right of Redemption A period of time after the property sells at auction in which the seller can reclaim the property Seller reimburses the amount of the purchase, plus associated fees Right of Redemption period varies from state to state

Preparing for Foreclosure Auctions Acquire current auction information Personally visit and inspect properties in which you are interested Develop a system to track foreclosures of interest

Acquire Property Information What is the estimated market value? Include repair or improvement costs Stop bidding when the property ceases to be a bargain

Acquire Property Information How much is owed? Opening bid is based on the amount owed to the foreclosing lender Properties can quickly cease to be a bargain once bidding begins

Acquire Property Information Are there other liens? In many cases, the winning bidder is responsible for paying off any liens on the acquired property Check for liens through a real estate attorney, title company, or personally check county records

Confirm Auction Status Confirm the current status of foreclosed homes Verify that the owner has not paid the amount in arrears Auctions are often postponed or cancelled without publishing new information

Confirm Auction Location Is the auction at the property site? Is the auction at a common site where multiple properties are being auctioned? Check with a foreclosure listing service, county clerk, or property trustee

Confirm Auction and Bidding Format Find out what auction format is being used Confirm options for bidder verification Confirm the bidding procedure

Determine Bid Cap Access what is considered a bargain price Reasonable auction purchase amounts are 20% or more below the full market value Consider repair and improvement costs Consider the area’s rate of real estate appreciation

Determine Bid Cap Figure in available financial capital Equity line of credit on an owned home Approach the bank for a loan against a Real Estate Owned (REO) property

Bidding on Auction Homes Confirm the property status and auction date again the day before Arrive early Locate the auctioneer as soon as possible to ensure validation Watch your competition Stick with the bid cap!

Winning Bidder Secure all necessary documents from the auctioneer Clarify next steps with the auctioneer and real estate attorney Check on ownership transfer and redemption periods Do not make repairs or improvements until the home has been legally transferred

Bank Foreclosures Versus Government Foreclosures The main difference is that the government often forecloses due to missed tax payments Auction winner must pay delinquent taxes as well as other fees Both offer lucrative investment opportunities Verify government auction format and bidding procedures

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