How to Bid on Bank Owned Homes
When a borrower does not make mortgage payments to his lender, the loan falls into default. Once this occurs, the lender initiates foreclosure proceedings to reclaim the property. The lender will then attempt to sell the property to recover the unpaid balance of the mortgage loan. A foreclosed, or "bank owned," home is typically offered for sale at auction first and, if the auction is unsuccessful, marketed in the traditional manner through a real estate company. Foreclosure auctions are open to the public and conducted at the courthouse of the county the property is located in.
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Instructions
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Weigh the risks of purchasing a home through a foreclosure auction. Some borrowers, when faced with foreclosure, will do extensive damage to a home, including stripping it of appliances, fixtures and anything else of value. If you are using financing to purchase a foreclosure, your loan may not cover any expenses beyond the actual purchase price.
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Check the legal notices in your local newspaper for upcoming foreclosure auctions. Properties to be auctioned will be listed along with their locations and how much is owed on the property.
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Visit the property. Most banks will not allow a formal inspection prior to the bidding on a foreclosed home, but you may be allowed to inspect the grounds and the exterior of the home. This will help you tell whether the home is in good structural condition.
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Use a title service to find out whether the property has any liens against it. Banks will not typically clear the outstanding liens of a property sold at auction, and the liens will remain attached to the property once you assume ownership.
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Get financing. Depending on the lender offering the property at auction, payment on a winning bid may be due immediately or within a few days of the auction. Since loans can take several weeks to process, it is important to have your financing lined up well ahead of time.
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Decide how much you are willing to pay before the auction begins. If a property is a good value, you will probably be competing with other bidders. It is easy to get caught up in a bidding war and bid more on a home than you originally planned.
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Call the courthouse and explain that you are interested in attending the auction. Some counties request that bidders register for the auction and provide proof of financing before being allowed to bid. The court can also inform you of the auction's rules and bidding methods.
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Attend the auction and bid for the home.
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