Saving Money With Smart Foreclosure Auction Bidding

How do people actually turn a profit in the real estate business? If real estate investors aren’t landlords, then chances are they have been buying and selling properties they have discovered through real estate foreclosure auctions. Real estate is like stock in that you have to buy low and sell high in order to make a profit. Buying from a foreclosure auction is a way to get the low buy in rate, but you have to use caution and know what you are doing.

Know Your Market

You must get familiar with the market you are buying in, so using nationwide foreclosure auction resources and buying property in markets across the country can be very risky. You don’t want to invest in property in Florida for example, if it is sitting in the middle of an area wiped out by a hurricane. The smart way to buy from a foreclosure auction is to determine which areas you wish to invest in, then learn the market and wait for auctions in those areas.

Smart Bidding

It is sometimes possible to contact the property’s current owner before the home comes up at the foreclosure auction, and try to strike a deal beforehand. In general, there will be about a month where the homeowner is free to find a buyer. The mortgage lender will usually prefer a direct sale to an auction anyway.

Even if a deal is not struck with the homeowner, you can always just bid at the auction. It is up to you to find out what realtor is handling the auction and if you can phone in a bid or if you have to attend in person.

Do not expect the current homeowner to open up with the details of the property. Foreclosure auctions are bound to different laws in every state, so it is your responsibility to find out what those laws are in the state you will be bidding.

Know Your Bid Limit

A general guideline is to bid around twenty percent less than the market value for the property. You can find the estimated market value by reading the complete valuation report or property reports. There still could be serious flaws in the home despite this market value, so you need to at least look it over yourself if not hire an expert to inspect it as well. Bargains at a foreclosure auction are great, but it can quickly turn into a nightmare if there are serious issues that will be expensive to fix.

On a final note, realize that you will not have a lot of time to pay up for your auction purchase. Keep that in mind when determining your bid.