How to Buy a Foreclosed Home at Auction

A foreclosure takes place when the borrower fails to pay his mortgage payments on time. Once a home goes to foreclosure, it is auctioned for sale. The lender's main goal is then to break even at the auction by finding a buyer who will offer the amount still owed on the home.

Difficulty: Moderately Easy

Instructions

1. Get a real estate agent. The agent will have information regarding various foreclosures around the neighborhood you want to live in and when the auction will take place. You can also call City Hall to get a listing of foreclosed homes that are set for auction. It will have the date and schedule for auctions as well.

2. Determine how much money you are willing to spend and the location and type of home you want. Decide on how many rooms and the size of the rooms. Once you decide on this, you will be able to determine how much money you are willing to spend for what you want. Even though the home may be a foreclosure, it doesn't necessarily mean it is dirt cheap. If the home has had recent improvements, then chances are the seller will want more than other recently sold foreclosures.

3. Go to the auction. Your agent will have the information regarding the home you are interested in. Then attend the auction that is planned for a certain date and time. You will need to be sure to bring identification such as a driver's license, 10 percent of your offered price and your real estate agent's information such as name and number. Register at the venue in order to be able to make your bid.

4. Get the auctioneer's catalog at the auction. This information will include recent improvements and needed improvements on the home along with the lender's information. This is when you can decide on how much you are willing to spend for what you are getting. The bidding will begin at what is called the reserved price, which is the lowest price the seller wants to sell for.

5. Put down a deposit. The deposit is a percentage of your bid price. If you made the highest offer, then you will need to give the seller (lender) 10 percent of the amount offered for the property. In order to do this, you will need to give the auction's clerk not only the deposit, but your identification and details of your real estate agent. The information and money will be transferred to the seller and within days the paperwork will be finalized and you will have bought your foreclosed home.

Tips & Warnings

• Be certain you want the home before bidding and putting down a deposit. If you back out of the agreement, then you could end up paying the seller's expenses along with other fees.