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Step 1
Have the Funds Available Before Auction - The general wisdom of most prospective home buyers is that you must come up with the total sum payment. While it is true that upfront funds are required, you are not necessarily required to come up with an all-cash payment In some states, bidders are required to bring the full amount they want to bid in the form of cash or cashier’s check. In other states, bidders are required to bring a 10 percent minimum of the bid amount, and pay the remainder of that amount within a certain timeframe stipulated by state law if they become the winning bidder. Yet in other states, you can finance your purchase with a home loan at auction, just as you would with a conventional purchase through a real estate broker. Needless to say, it is very important, that you have your financing in place before taking part in any auction. Backing out of a winning bid due to lack of funds could result in you losing your earnest money and could land you in a lawsuit for breach of contract signed by you on the day of auction. Bidding procedures varies from state to state, and you should become familiar with the procedures in your local area.
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Step 2
Find the Auction Locations Your Area - A good place to start would be the newspaper classifieds. Notices for upcoming auctions are normally advertised in the real estate section. The National Auctioneers’ Association or the National Association of Realtors are also great sources for upcoming auctions nationwide. You can find both of these organizations on the web through Google. Real estate investment clubs may also have access to upcoming auctions. The information provided will be the date, time, and location. Most auctions are in the same county where the property is located and can take place either at the courthouse steps or at the property address.
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Step 3
Set Up Several Home Inspections - Once you get a list of homes that will be up for auction, you will want to visit the ones that interest you. Arrange an inspection for each of them. For this, you will need to hire an experienced home inspection specialist, and have him/her thoroughly examine each property you're interested in. Most states usually allow you to have an inspector look over the property days or weeks before the auction. You can go to auction without a home inspection, but as many experts agree, this would not be a wise decision. Since you will be buying the home in “as is” condition, you will want to do as much as permitted to avoid any problems later.
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Step 4
Make Sure that the Homes Have Free and Clear Title - Make completely certain that the homes are clear of hidden liens. You will need to hire a real estate attorney or title company to check for such liens as mechanic’s liens for unpaid work done to the home. The priority of a lien is usually determined by the date it was placed on the home. For example, a first mortgage will usually have the first priority, and all other liens will be considered junior liens. In most states, the public auction wipes out any junior liens. However, tax liens always have the first priority position over all other existing liens. If there are any outstanding liens on the home, the winning bidder may be required by state law to bear the responsibility of satisfying those liens. Therefore, it is imperative that you check for any liens, and the priority of the liens before you bid at the auction. In addition, an organized and thorough auction company will usually have a written and current title opinion showing that the home has free and clear title for all prospective auction buyers to review prior to auction. While you’re at it, you should get the fair market value of the home as well. The quickest and easiest way to do this would be to do your own MLS (Multiple Listing Service) search using some of the free online real estate services.
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Step 5
Go to the Auction and Bid - The opening bid at the auction is based on the total amount owed to the foreclosing lender, and may include fees incurred because of the foreclosure proceedings. If no one bids above that amount, the foreclosing lender will take possession of the property, and place it back into its inventory known as REO or Real Estate Owned properties. Arrive at the auction location early. The auction process might prove to be an overwhelming experience for someone who is new. Don’t let this intimidate you. Spend the first few minutes watching other more experienced bidders so that you can get an idea of what it entails. Keep in mind that there will be people there who have been buying auction homes for many years. Take the opportunity to learn and enjoy.
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Step 6
Take Proper Ownership of Your New Home - If you win a bid, the next step is to retrieve the necessary documents from the auctioneer for verification purposes. Make sure that you are completely informed by both the auctioneer and a real estate attorney about further steps needed before taking ownership of the home. In some states, ownership can be transferred immediately or within a few days. In other states, you may need to wait as long as a month or more for the court to confirm the sale. Get all of the information necessary before you take ownership of your new home.
Comments
dsarokin said
on 11/3/2008 Very good overview of the auction process. I wish I had the cash for this. Maybe someday...
iamageniuster said
on 10/12/2008 Great information. I'm about to go bid on some real estate in my area. Thanks for sharing.