In recent years, residential property foreclosures across the country have reached epidemic proportions, and many experts see a big wave of them coming on the real estate horizon. Although those facing foreclosure may see their families displaced and their financial futures uncertain, there are some who will use the opportunity to build their investment portfolio. By purchasing a foreclosed homes, condos, and commercial real estate through local court auctions, buyers and investors prepare to build significant wealth.
There are astute individuals and business entities throughout the nation whose sole mission is to acquire foreclosed properties at auctions. Thanks to the internet and local municipalities that publish catalogs of properties available at auctions, -as well as many private sources of reliable information related to properties that are available in the auction market-, buying a foreclosed property through an auction, is it has become easier for those who wish to take advantage.
Although it might not be easy, perseverance can be rewarded and profits can be made by hoarding foreclosed properties. You will need to spend some time researching your possible investments. However, at a certain point, things can get nasty. Those who are not hard-hearted should not dedicate themselves to this.
The Beginning for Those who have successfully developed a system to discover, track and evaluate a potential purchase. Most of those who are formal auction buyers will monitor local official auction sites, and will keep data on multiple properties simultaneously. The goal is to be ready to bid and buy the minute you have identified a property or properties that you feel satisfy you. If you learn the rules of the game, you can become a real winner.
Ideally, you should be able to either view the property in person, or through a trusted representative. There are countless details you can learn by simply visually inspecting your potential purchase. However, in many cases, there will be little or no access to the interior of the property and a buyer will be making the purchase blind, and without any guarantee of the good condition of the property.
In Florida, a foreclosure auction typically occurs within 30-60 days after the foreclosure verdict is rendered by court ruling.
In most localities, the county clerk's office will be the primary source of foreclosure auction information. (They also do tax auctions, make sure you know the difference). The clerk's office will generally publish the auction details in the local newspaper and / or on the official site, including a list of available properties, as well as the date, time, and location of the auction. You need to spend time familiarizing yourself and browsing the clerk's official site to better discover the properties that are available, and to understand the buying process.
If you plan to attend an auction and bid on a property, you need to be familiar with the process before showing up. Attending a couple of auctions in advance will give you an idea of the procedures, and you will learn the details on how to proceed. The bidding process can vary in different places - some require a certification of funds, such as a cashier's check, for the total amount of the purchase, while others only require a percentage of the total, with the balance due within a specific number of days. If you have a contact in the real estate business or know an attorney who deals with foreclosed properties, you might want to ask them to join. Still, nothing beats being there to see what happens first hand.
Get the Facts to Successfully Buy a Property at Auction. There are certain key details that you will need to know up front. First and foremost is the real fair market value of the property. You should study the information on recent sales of similar properties in the same geographic area to determine what the market indicates about the real value of the property. That information, combined with the amounts owed and the amounts of any pending liens on the property, will help you determine whether the property represents a reasonable investment. There are also additional fees owed to the mortgagee, so make sure you are aware of all applicable costs before bidding.
The opening offer amount represents the total of all amounts owed on the property. In some cases, the winning bidder will be responsible for indemnifying any outstanding liens on the property before a certification of transferred title is issued. An attorney, a real estate title deed company, or a county records search will expose any liens that have been placed on the property. Be sure to do a thorough investigation of pending liens, there could be more than one mortgage on the property, and there could be liens that would have been placed on a second mortgage, or a lien tax, in its place.
Even after the auction, a lien tax may still be in effect, so make sure you understand all the financial obligations you will face to legally take possession of your property. You should also consider any potential repair and upgrade costs that you may need to bring the property to a reasonable market value, if you intend to resell it, or rent it as investment property.
The mortgagee will typically bid for $ 100, (to keep tax stamps cheap). If no one else bids more than the total amount owed, the mortgagee will gain possession of the property. In your favor, you have the fact that in the vast majority of cases, the creditor does not want the property, and will be eager for it to be sold successfully at auction.
How far to bid? Once you have all the information, you will need to determine the specific amount that you can comfortably bid to justify the purchase as a reasonable offer. It is vital that you resist the urge to fall in love with a property you are planning to bid on. In the heat of the auction, where there will likely be many bidders competing for the same property, it will be easy for your emotional attachment to get the better of you, and you could end up bidding for more than the amount you set as a limit. After all, they are only bricks, so try not to lose your mind. With the prevalence of foreclosed properties hitting the auction market these days, you can be sure that if you can't get hold of the property you were planning to buy, a similar opportunity is on the way.
Obviously, you need to be sure that you can complete the transaction if you end up being the winning bidder. Make sure you have enough cash on hand to close the deal in the specified period after the sale. You could lose any deposit you paid at the auction if you were unable to finalize the deal. Remember, this arena is not for novice investors.
Ready, Set, Go… Once you've done all your research and understand the information, you're ready to jump in and push. Each auction will be under the direction of a trustee who will have been appointed by the liens court. You need to know how to contact that person to see if the auction you plan to attend is still scheduled. Often last minute scheduling changes or other factors will dictate a change to the actual auction date. It is suggested to call a day before to reconfirm this.
In Miami-Dade County, the Clerk of Court already conducts an online / internet version of foreclosed property auctions. Those who register in advance via its official site can bid online, against those who attend the auction in person. But be warned, this method is generally recommended only for those skilled bidders who are intimately familiar with the ways in which this process occurs.
If you would prefer to attend online when the auction takes place, plan to go to the physical auction site earlier, in the hope that you will have already had the experience of attending multiple auctions as an observer, so that you feel comfortable in that atmosphere. Just keep in mind that there will be people there who make this a livelihood, and they take it very seriously. Don't be surprised if you are not greeted with open arms by the other bidders, remember that they will probably be competing with you for the same property, and some of them don't like the competition.
But, don't let them intimidate you. Again, keeping your composure, and controlling your emotions and finances is the key to getting out of there as the happy owner of a potentially profitable real estate commodity.
Congratulations! There are several steps you will need to take to successfully take ownership of the property once you have become the winner of the bid. Make sure you get all the pertinent documentation that you require from the auctioneer to declare you the winner of the bid, and clarify any additional steps necessary to take possession of the property. If you have questions about the legal requirements related to the transfer of titleholders, it would be wise to consult with an experienced real estate attorney.
Depending on local laws, you may have legal rights to the property immediately, or it could take 30 to 60 days. There may also be what is known as a 'redemption period', within which the former owner has the opportunity to buy back the property from you, stipulating that you have paid the full auction price plus any applicable fees and costs. However, this is rarely the case, as if the property was auctioned, the former owner is most likely not in a position to buy it back. Still, it would be wise of you to postpone any improvements you have planned for the property until you are absolutely certain that it already belongs to you.
If there are tenants currently living in the property, you may have to evict them. You should consult with an attorney who is familiar with the process, or contact your local sheriff's office to find out how to do it legally, and as efficiently as possible. Of course, you could also choose to allow tenants to stay in the property, even for a short period, which could help you recoup some of the initial funds outlays made during the purchase process.
Buying a foreclosed property through auction can be an excellent way to build your real estate portfolio, bearing in mind that you are aware of all the difficulties that lie along the way. Smart investors earn significant returns using this acquisition method, and consider it a business operation. Arm yourself with as much information as possible to make a thoughtful decision, and you may find that your efforts are well worth your time and hard work.
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