Tips For Buying At A Foreclosure Auction

1. Before going for the foreclosure auction. Research, into the antecedents of the foreclosure property diligently. Check all its paperwork to find the real cause of the delinquent payment default. Find structural defects or other problems that led it to a foreclosure auction. Your bid at the foreclosure auction is absolute; there is no backing out. If the deal is bad you lose out on a huge bargain. Attend a few auctions to get the feel of the process. Initially, bid only on foreclosure properties in your close vicinity or neighborhood to get familiar with foreclosure auctions.

2. Check the condition of the property. Check the condition of the property before bidding. If the property is vacant, take a peek inside to see the general condition. If people are living there, you may request to take a look inside. Keep in mind that the house will need cosmetic upgrades like carpet, paint, new appliances, kitchen cabinets, bathroom vanities, etc. Consider the fix-up estimates, other costs, and your profit margin before bidding.

3. What to bid. Think hypothetically what you will do with the house if you win the foreclosure auction bid. Are you going to live in it, fix and sell it, flip it to another investor, finance it for rental purposes, or resell the property quickly? Keep all these factors in mind, calculate conservatively and bid what you want to pay, not the highest bid. This method of calculating your bid can bring you a good bargain option.

4. Find out the foreclosure auction venue.  The foreclosure auctions of your city or county are usually listed in foreclosure listings or as bank foreclosure listings and published in the legal section of your local paper or legal newspaper. Information service providers also carry this information. They can send it to you through fax, mail or e-mail on a regular basis on basic fee charges. If you are eyeing some particular property, follow its movement on the foreclosure auction listing; contact the lender's attorney or the trustee for information about the sale date. Check a day prior to the auction to confirm about its status and to make sure the foreclosure auction has not been postponed or delayed by the lender or the borrower filing for bankruptcy. 

5. Money to be carried to the auction.  Contact the attorney, referee, sheriff, trustee or other official to determine the hard cash needed at the foreclosure auction. Each state has its own rule. In most states you are expected to pay 10% of the winning bid price on the spot, in form of certified funds. The balance amount of 90% is to be paid in 30 days to avoid forfeiting the property. Some states expect total payment of the bid on that very day itself. It is always advisable to check on the mode of payment on the winning bid, beforehand. It makes more sense to carry certified checks or money orders in smaller denominations, to give safety deposits.

6. Actual bidding at the auction. Most foreclosure auctions begin and end in a matter of minutes due to less number of bidders. Arrive extra early to avoid traffic and parking problems. An early arrival leaves you less flustered and gives you time to get the feel of other bidders. Do not get too excited like a beginner. Buying at a foreclosure auction requires a lot of cash and luck. If you have access to a large credit line or have a moneyed partner, you can make a killing with a real bargain at foreclosure auction. Most of the foreclosure properties either have too little equity, or have so much equity that a large crowd shows up to compete in the bidding process. A wrong calculation, faulty homework and over-excitement can lead to bad bargains.

Buying a property at a foreclosure auction can fetch you handsome returns. You must plan the entire process thoroughly so that you are able to clinch a real good deal. Adherence to the tips given above will help you in this process.