When looking for a home, it’s a high possibility that a few foreclosures may creep into the pile of “maybes”. Though there are a few ways to acquire a foreclosed home, the most commonly seen way is through auction. While auctions may sound fun and may seem to be the best way to get a bargain, there are several things to consider. The property is likely not going to be open for viewing, so the exact status of the inside of the home can be a bit iffy, plus there can be fees and other things begging for money that may come as a shock.
Prior to deciding whether an auction is the best way to buy a home, and to better understand how auctions work, attend a few auctions. This will help- not only because it is a preview of the types of homes available at auction, but also familiarises a person with the auction process. Though there can be some pitfalls that come with a foreclosed home sold at auction, it may be the best option and may work best for some people.
Auctions are primarily paid off in cash. Every state has differing laws surrounding auctions, so it’s best to do some research into what laws and minimum payments are based on the locale. Know upfront how much money must be in hand to purchase a home at auction. It can vary per auction and based on location. One pitfall that demands to be considered it budget. With auctions, mortgages are out of the picture so buying a home at auction requires a cash buy. They can also be intimidating places- the professionals may try to use psychological tricks such as maintaining an intense persona and standing near the auctioneer. This gives them the advantage as they seem to be too overwhelming to beat in a bidding war.
Check out the surrounding areas. If there are many properties that look rundown or are also up for sale or auction, buy elsewhere. It’s likely that the property values have gone down and that can make it difficult to resell later. Some agents focus on foreclosed properties, so asking around and checking with various agents could prove helpful. Remember, however, that using an agent can also add fees- so calculate that cost into the budget required to purchase an auctioned home.
Buying a home at auction comes with all of the potential perks and downfalls of buying a home sight-unseen. Driving by the property and checking out the state of the exterior of the home can provide context clues toward what may be waiting inside, but remember that looks can be deceiving. Also remember that if someone is living in the home, there is still the possibility that they may get upset and wreck property prior to evacuating the premises. Because this is a home that could be in any state of repair, it could be a great buy or it could be a disaster. If the tenants were angry upon removal from the home, there’s a high chance that property has been damaged- anywhere from minor cosmetic damage to major plumbing, electrical, and other such damages.
Buyer beware of pests, insects, termites, and rodents. If the home wasn’t well cared for or has been empty for some time, then there is a high likelihood that some furry friends or eight legged beauties have claimed the premises. This could meant that the colonies of pests are going to be easy to remove as they just recently moved in, or it could mean a lot of money, headaches, and tenting of the home to free it from rodents and bugs.
Liens can be another potential problem inherited by a buyer. Because the home is in foreclosure, there’s a chance that there is a federal or other type of lien. This means that if the lien was put on the property after the original mortgage was acquired, the lien would be a secondary amount of money owed after purchasing the foreclosure. Fortunately, liens are public record so if there is a bit of time to research a home, then it’s possible to see that a lien will come with the property prior to attending the auction. However, be cautious if an auction crops up and there is no time to check out the place- that may lead to a whole lot of money owed that hasn’t been put into the budget!
There are ways to avoid many of the negative effects of buying at auction, but unfortunately there’s not always a way around all of them. It may be more beneficial to contact the bank and see what homes they have available. Walkthroughs, paid off liens, and the ability to use a mortgage are just a few of the perks that come from purchasing through an avenue other than auction. Likewise, using an agent to check out what homes are being sold around the area may prove more beneficial than relying on auctioned properties. Not only does an agent know the area well, but they can likely tell you what properties are the best value for the location and size.
Whatever path is chosen to buy a home, it’s important to recognize that there may be more to buying than meets the eye. When in doubt, research, research, research! The more information that is uncovered, the more likely the purchasing of a home will go smoothly. Auctions can be beneficial for those who know what they are doing, but may not be the best choice for first time or inexperienced buyers.