There are laws that govern the sale of foreclosures in your area. The laws vary widely from state to state, so be sure to check out the specific rules governing your state.
Live foreclosure auctions are free to attend and open to the public to ensure that a home being foreclosed upon receives the highest possible recovery for the bank or lender and the smallest deficiency for the borrower. Anyone can attend; however, if you want to bid, you’ll need to register. In almost all cases, you’ll have to show that you’re in possession of sufficient funds to pay for the property in full. (There are a few states that allow an auction day deposit and payment in full the following day).
Here are the basic steps for participating in a live foreclosure auction:
Find and track foreclosure auctions
If you are looking to buy a foreclosure home, consult an online resource like Auction Deals Today.com or Realty Trac. These sites will have foreclosures listed in your area.
Foreclosure sales data is usually available from the specific county either online or at the county courthouse, or from the third-party foreclosure sales agent, often called a “trustee.” You can also work with a local real estate agent or broker to identify these foreclosure properties, but you should know in advance that, by law, there is no agent commission on these sales.
Do your research
Be sure you read and understand all due diligence documents and transaction details prior to the auction. It wouldn’t be a bad idea to seek independent advice from a real estate attorney or a knowledgeable agent.
Research the estimated resale value of the property, how much the borrower owes on the mortgage, and whether there are any liens against the property.
Drive by the property, if possible
This will let you see the home’s condition—from the outside. Homes in the foreclosure process are usually occupied by the owner who’s being foreclosed upon or a renter. Do not trespass or disturb the occupant! Doing so is a criminal offense.
When you bid on a foreclosure, you’re bidding on the property “as-is.” You won’t know what condition you’ll find inside once you take possession. Extra, unexpected repairs could cost you thousands of dollars, so take that into account when figuring out how much you can comfortably bid.
Get your financing in order
Most foreclosure auctions accept cash, bank money order or cashier’s checks for payment. In nearly every state, you’ll have to pay in full immediately following the auction of the property.
County foreclosure auctions will require advance deposits. The deposit amount varies across municipalities, but generally runs from 5% to 10% of the expected final bid amount of the property.
Confirm all auction details, even on the day of the auction
It’s very common for foreclosure auctions to be postponed or even canceled. Sometimes an auction is canceled because the borrower comes up with the money to pay the lender the amount they owed, obtains a loan modification or sells the property as a short sale.
Attend the auction and bid
Check-in at least one hour before the auction’s start. Get an Auction Bidder Card and raise it when the auctioneer announces a price that you’re prepared to accept as your winning bid.
If you win the auction, your payment is due immediately or the following business day (dependent on state). Once you’ve paid in full, you’ll complete a certificate of sale or an execution of sale receipt, deed upon sale and IRS Form 8300, subject to state-specific laws.
Wait for your certificate of title
While you’ll get your certificate of sale immediately, the actual certificate of title may take as much as 10 days to complete. During that time, the original owner may file an objection to the sale and pay the amount owed in full to retain their rights to the property. Don’t do any work on the property until you receive the certificate of title.