How do foreclosure Auctions work

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How Do Foreclosure Auctions Work

• Learn how to verify foreclosure auctions and
  laws, make bids and take ownership of properties.

2
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

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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

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Auction Formats

• Minimum Bid
• Absolute Auction
• Auction with Reservation

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Bidder Verification

• A bidder must provide proof of funds that they
  can pay for the property before the auction
  begins
• Cashiers check for a deposit
• Pre-approved loan paperwork

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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

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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

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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

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Acquire Property Information

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

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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

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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

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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

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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

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Confirm Auction and Bidding Format

• Find out what auction format is being used
• Confirm options for bidder verification
• Confirm the bidding procedure

15
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 areas rate of real estate
  appreciation

16
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

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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!

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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

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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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