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The Basics of Foreclosure Auction Bidding
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By Tiffany Binate - Editor
Record Information Services
November 2007
You’ve been hearing the news for the past year about the record number of foreclosures in Chicago, and maybe you’re considering getting on the investing bandwagon. One way to profit in the real estate game is to buy a foreclosure home for rehabbing or reselling at public auction. For beginning investors unfamiliar with this process, here are some tips and advice.
To find out about upcoming auctions:
* Read the legal notice section in the classifieds of the local newspaper
* Go to the county clerk's office and look up the list of homes for sale for any given day
* Subscribe to an information service provider’s lists of preforeclosures and auctions that can be obtained through www.public-record.com
Location of Auctions
Public auctions are usually held on that county courthouse’s steps. If there are particular properties you are interested in, you will want to check the status of the property on the day prior to auction, as they can still be delayed by bankruptcy or last-minute lender negotiations.
Do your Homework
A public auction is the final consequence for a home that went into foreclosure 7 months ago, and whose owners were unable to refinance, sell, work a deal with the lender, or sell to an investor – before the auction takes place. That means a few things for the potential buyer at an auction.
For one, it’s possible that the property was not a good investment to begin with – either having no equity, or too many repairs needed for an investor to make a profit. And since you have no way to investigate the condition of the home before buying at an auction, you may need to increase your estimated repair budget for a home bought at public auction.
Since you are given no information about the home at the auction, you will need to do your own research on the property to evaluate it as a deal or not. Take a drive by the property and check out its condition. This is a good time to see if anyone’s living in the home too, since the bank will not evict the tenants prior to an auction – that’s the new owner’s job. It’s highly unlikely you will get to see the inside of your prospect home, unless the tenant invites you in. So take in as much of the exterior as you can.
You will want to investigate the financials of the home, including how much equity is in the loan, the status of any liens and the title, the market value of neighboring homes, and the appraised value of the home. Researching the property can be very time consuming but it is crucial to knowing what you are buying. Working with a good information services provider may have done some of this work for you already.
You will also want to make sure you know what you are willing to pay for a property, and what you plan to do with it if you buy it. Rehab and rent it or sell it? Wholesale it to another investor? Have a clear game plan in mind.
At the Auction
Make sure you arrive at the auction on time, as most auctions take only a matter of minutes. Oh, and make sure you bring lots of cash, or bank notes, because you will have to pay for the home in entirety (or within 24 hours in some cases).
Make sure you understand what you are bidding on, as all sales are final. It is not the fault of the sheriff conducting the sale if you accidentally bid on a 2nd mortgage on a home, instead of the first that you investigated. Make sure you know what you want to pay for a property so you don’t get stuck with a bad investment.
There will be many bidders at these auctions that have done their homework. Be prepared to be outbid, and therefore have your mind set on several properties in advance instead of just one. Quite often at auctions, the property goes back to the lender, as mentioned above - if it hasn’t sold before the auction, there may be a good reason investors don’t want it.
Knowing where to find properties, doing your research, and most of all practice and strategy is what it takes to find a bargain at the foreclosure auction block.
Record Information Services is Chicagoland’s premier provider of Foreclosure Auction lists and Preforeclosure lists, all online at www.public-record.com
Contact us today for a free, no-obligation tour of our online Foreclosure Leads System! Call (630) 557-1000 or e-mail info@public-record.com
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