Facing Foreclosure Auction? Do Your Home Work

Posted in Foreclosure Auction, October 8th, 2007 |

Foreclosures have come – they are knocking at every alternate door. The foreclosure process consists of several steps. When the borrower fails for the third consecutive time to make payments the lender sends a foreclosure notice. Time is again given to allow for payment but in the event of a failure an auction date is set.
Auction may be of two types – one is organized by the Sheriff and the other by the lenders.

For a new comer trying to carve a niche in the real estate business the Sheriff’s auction can be challenging. The amount has to be paid in cash or certified cheque right there and then. In the other kind of auction there is the option of going for mortgage financing.

Ralph Roberts has founded a brokerage firm in Detroit area and co-authored a book dealing with foreclosure investments – ‘Foreclosure Investing for Dummies’. He suggests that the buyer should first do a lot of research on the property well ahead of the auction date. This should include a visit to the city hall to hunt public records in the building department to find out first hand if there have been any violations of building rules.

A check out on the property if possible will answer queries about vacancy and if it is in an acute run down condition. There is the clause of ‘reserve’ to be seen to. It is the minimum price the seller is willing to agree. But until the bid is done nobody will know about it. In an ‘absolute’ auction the highest price is sure to win. It will not be unwise to spend about $350 or so to engage a valuer to appraise the property. Having gone through these steps the potential buyer should now think clearly about what is the maximum price he or she is willing to offer. Having reached the number it is necessary to stick to it without vacillating.

Roberts also advises the buyer to opt for a buyer-broker agreement with a property agent who will give advice about the auction operation in return for a commission. The latter is about 3% of the purchase value.

Despite this groundwork the presence of someone known and trustworthy will help during the actual time of the auction so that the buyer does not lose his cool and bids for more than what was initially planned.