How To Buy A House At Auction: A Guide
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Be careful with the terms, as they are set according to each investor and/or platform. They typically fund quickly but have much higher interest rates than other options. Online auctions can be found on sites like eBay, auction.com and others.
Most auctioneers will require payment by verified funding sources, like a cashier’s check. If you owe excess funds, those may be accepted within a few weeks of the sale. Most people pursue this option because there is the potential of finding a really great deal. You could find a diamond in the rough that could become a nice home, often at a discount.
How to Find Foreclosed Homes for Sale
Buying a house in cash can streamline the process, but it’s not always the most beneficial decision for a buyer. When you come to the closing table, bring your ID, the cashier’s check or wire transfer for the purchase price, and anything else your agent says you might need. Title research is an important part of the homebuying process because you want to make sure there are no unknown liens or claims on the house before you take ownership. Depending on where the property is located, your settlement agent will do a couple of things for you.
Your purchase will always be subordinate to the first lien, which could foreclose and wipe out all subordinate liens. Sellers generally prefer blind bids, even if it reduces competition. You’ll have to make a bid without knowing how others are bidding. Motivated buyers need to make a bold bid upfront instead of taking a wait-and-see approach. Typically it’s best to go the hard money lender route, though.
Research properties
Before buying a house, it’s important to compare mortgage rates from multiple lenders. Homebuilders may auction off a group of homes to sell them all at once. Usually, this happens when the homes have sat on the market for a while without a lot of buyer interest. Get to auctions early or plan to stay after and ask questions of some of the auction company employees or other bidders. Pretty soon, you’ll develop an understanding and a feel for the process. If you’re a first-time auction attendee, you might not have a clue about what’s going on.
The interest rates, down payment, security, and information requirements may be similar to hard money lenders. However, they can vary widely according to the individual lender or group of lenders. When housing prices are especially strong, homeowners typically have lots of equity in their homes. And then if they start having trouble making mortgage payments, they are much more likely to sell those homes via the traditional route than to let the home be foreclosed on.
The Bottom Line: Buying A House At Auction Comes With Risks
Buying a house at auction can have a lot of advantages if you do it properly. That means that you need to know both your rights and obligations. Make sure to inform yourself about the property before you buy it. You may end up getting a beautiful home at a very affordable price. However, this option could be highly risky so keep in mind there are other home types that might be a better fit.
If you don’t make the required payments on the home equity loan, your own residence could wind up in foreclosure. If you already own a home, you may be able to use your home’s equity to secure a home equity loan or line of credit. Then you can use the proceeds of the home equity loan to pay for your foreclosure house won at auction. Real estate brokers, contractors, and appraisers are all familiar with the local market. They would be the best people to work with if you want a foreclosed home on auction.
It is up to the buyer to be well prepared and use all available resources to help them through the process. Do note that these are expensive sources of cash with high interest rates. As a property investor, you want to be careful when opting for personal loans.
Check out the auctioneer’s website for details on the bidding process. Bidding may take place at a live auction on the courthouse steps or via an online auction. A real estate agent can also help with this process by gathering a list of recent sales of similar properties in the neighborhood and helping you do preliminary title searches.
The downside is that you’re guaranteed to pay a certain amount. Knowing that there’s no chance you’ll pay less than the minimum can cut down on competition by separating serious investors from tire kickers. Being online makes real estate auctions much easier to access, which is a double-edged sword for prospective bidders. On the one hand, it makes it easier for them to access and get in on the potential deals. Plus, online real estate auction sites make it easy for newcomers to watch and learn until they feel comfortable jumping in. There are many different reasons a home ends up at auction, but usually it’s because the homeowner started having financial problems.
Vandals have also been known to strip entire homes of their copper plumbing. When you buy a house at auction, you won’t be able to have a home inspection like you would in a traditional home purchase. Each home auction will have its own set of rules and requirements that you need to adhere to.
Some financial institutions such as Bank of America also have web search pages for foreclosed homes. You can buy all sorts of properties at auction, including single-family homes, multi-family homes, commercial property, and vacant land. For this article, we’ll focus on residential property auctions. Public auctions exist as an integral part of the foreclosure process. While I touched on it above, I need to cover this process in more detail here. Investors will also want to make a profit, either by selling the home after it’s repaired or renting it out.
If there’s damage, repairs by the owner aren’t part of the equation—but, as used-car and vintage furniture aficionados know, “as is” translates into a discount. Many real estate websites, including individual firms and listing services, offer the option to search by short-sale status. Pre-foreclosures are typically listed in county and city courthouse buildings. In addition, many online resources, including Foreclosure.com, list properties that are in the pre-foreclosure phase. Finding foreclosures can be rewarding, yielding diamonds in the rough or real-estate fortunes sold below market value.
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