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If you’re hoping to buy a house, you probably already know that you can get some sweet deals at a foreclosure auction. But you might be wondering — how on earth do I find foreclosure auctions near me, and how exactly does the auction process work?
Read on for details about the different stages of the foreclosure process (including the possibility of snagging a great deal during the pre-foreclosure stage, or after a home has failed at auction), how to find local foreclosure auctions, and what to do so that you’re prepared when you attend.
The stages of foreclosure
Foreclosure isn’t just an end state for a property; it’s a process with a few different points at which it might make sense for you to jump in as a buyer.
The owner is in default and unable to catch up on their mortgage payments, but the property is not yet up for auction.
Homeowners typically must be at least three months delinquent in order for the lender to send a notice of default, starting the pre-foreclosure timeline. This notice of default is often made public record.
The pre-foreclosure period can last 3 to 10 months. At any point during this period, the owner can pay off the debt and stop the foreclosure process. The owner may also opt to sell the house, possibly as a short sale with bank or lender approval.
Buying a pre-foreclosure can be beneficial to all parties involved. The homeowner who is delinquent on payments is able to get out of debt and avoid damage to their credit history. The lender avoids the lengthy and costly process of foreclosure. And the buyer has the opportunity to get a very good deal on the price.
Pre-foreclosures are not always easy to find, however. Your county recorder may post notices of default…or they may not. And a pre-foreclosure might come with some unexpected expenses, too: you may be responsible for unpaid taxes, property liens, repairs, and renovations.
The bank has done the paperwork required to put the home up for foreclosure auction. The exact process by which this occurs varies by state.
The home may go through a judicial or a non-judicial process. More than half of all states allow for “power of sale” provisions in mortgage contracts, which allow the lender to foreclose without using the court system. In other states, the lender is required to file a lawsuit in state court. You can check out this page on nolo.com, a website boasting 48 years of legal authority, to find out which process is the norm in your state.
The full process from first missed payment to foreclosure sale can take one to two years, but it is often shorter for non-judicial processes. While judicial auctions generally take place in a courthouse, or on the steps of a courthouse, non-judicial auctions can take place elsewhere, including on the courthouse steps, at the property itself, or at another site (such as a convention center).
Foreclosure auctions are usually well-attended by investors and cash buyers, so be aware that you may be up against some competition for the inventory available. According to Andrea Gordon, an Oakland-area real estate agent with more than 21 years of experience, what happens at an auction can vary widely.
“Sometimes if something is super popular — like, let’s say it’s a vacant multi-unit in downtown Oakland or something — you might have 80 people show up.”
Bank-owned or REO owned
The house went up for a foreclosure auction and did not sell; now it’s hanging out until someone buys it. If a lender offers mortgages, the lender website will often have areas where you can browse bank-owned homes. Wells Fargo, Bank of America, and Citibank are just a few.
Finding foreclosure auctions near you
The first step in attending a foreclosure auction is, of course, finding the auction in the first place. There are many places where auction information might be listed.
You can search for judicial auctions in city or county public records. An internet search for your city or county name along with the words “public records,” “foreclosure,” or “foreclosure auction” is likely to turn up results that lead you to the appropriate information. You can also search for listings in local papers; often, public auctions have to be listed by law.
Never underestimate the power of driving around and looking. You can come across foreclosed homes with posted auction announcements, and you can also come across potential deals that aren’t yet on anyone’s radar.
Agent Andrea Gordon suggests driving around neighborhoods, and if a property looks downtrodden, check the address against public records to see whether they’ve been paying property taxes (this is sometimes a reason for foreclosures). Then, Gordon advises asking a real estate agent to “contact the owner by mail.”
Connecting with a real estate agent who specializes in foreclosures is a good idea. They come with years of experience, and they’ve been through this all before. Note that not all real estate agents are willing or able to work with you on a foreclosure purchase, so be sure to check when searching. You can search for real estate agents in your area on the HomeLight agent search page.
This auction looks awesome. How do I attend?
If you are like most people and have only seen auctions in the context of a fast-talking auctioneer on TV, then the process might seem intimidating. Where do you even start?
The first thing to remember is to show up at the right time. Allow yourself extra time and plan on arriving early if you are unsure of the exact location or are going somewhere you’ve never been before. These auctions usually don’t take very long; you might show up five minutes late and miss everything. Check out this article for tips on how to bid.
Make sure you understand what you’re getting yourself into. With a foreclosure, you can’t walk through the home before you buy it. There are no home inspections, and you will be responsible for any liens or debts on the home. And most importantly, you can’t get a loan for a foreclosure.
You can find details about how the auction works and what you will need to bring with you in the foreclosure listing or the court office website. Often you will need a government-issued ID, appropriate documentation if you are not buying under your own name, and the funds.
Some lenders require the full payment amount at the time of the auction, while others require only a down payment, with the rest of the funds to be paid at a later date. Payment is usually required in the form of cash, money order, cashier’s check or certified check. Personal checks and other forms of payment are usually not acceptable.
One strategy is to arrive with several cashier’s checks in different amounts. If you secure the winning bid, simply use the check that’s closest in amount. (Overpayment can always be refunded.)
When asked who attends these auctions, Gordon says you can expect to see any combination of regular people, real estate agents, attorneys, and home flippers. The auctioneer (typically the sheriff at a judicial auction) will set the starting price, which is determined by what the lender hopes to get, and then they increase the price in increments. Increment size varies and depends on the auctioneer’s discretion as well as the home value.
If you are still unsure what to expect, consider attending an auction for a property you aren’t interested in first in order to get a feel for how they work.
Important things to remember
Even if you win the auction, the home might not be yours. Sometimes there is a redemption period where the homeowner can still pay off debts and get the property back. View the chart on the nolo.com website to see if this applies to your state. Because of the redemption period, the homeowners might not be formally evicted until well after the auction, so it’s good to remember that you might not be taking possession right away.
There may also be unpaid property taxes or liens. You often cannot get title insurance on a foreclosure for at least six months. The home may also be in disrepair and require significant renovation. It is considered wise to budget about 10% of the purchase price for such repairs.
Purchasing a foreclosed home is as much of a risk as it is a potential steal of a deal. Make sure you are prepared financially for additional expenses.
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