How to Buy - Foreclosures
Foreclosure properties can offer great deals for investors looking for the best possible deals. In this post, we’ll look at what a foreclosure is, how you can find them, and the process of buying a property at a foreclosure sale. Knowing how to buy a property at the foreclosure auction is an essential skill for any investor, regardless of whether or not you choose to make an offer.
What is a Foreclosure?
A foreclosure, also known as pre-foreclosure, is a property with a mortgage in default. They come due to the borrower not paying the home loan for an extended period. Lenders seek to recoup the money owed by selling the property through foreclosure. Since lenders do not want to own the property, they are motivated to part with the home and may list it for sale at a lower price.
Why Buy a Foreclosure Property?
The main reason that real estate investors seek out foreclosure properties is simple: they are typically priced well. Buying a home at a good value can go a long way to meeting investment goals, whether you’re looking for a buy-and-hold, a fix-and-flip, or a property to live in yourself. Every buyer wants a motivated seller, and lenders are highly motivated to part with their foreclosure properties.
Another one of the main benefits of buying a foreclosure property is the sense of instant gratification. Unlike other types of sales, which have lengthy closing periods, foreclosure sales are sold to the winning bidder on the day of the auction. This relatively fast turnover time allows the rehab process to start much sooner. In some instances, there may be exceptional circumstances, such as redemption periods, that delay the close of the sale, but in most cases, the property will be sold to the winning bidder as is on the day of the auction.
The Risks of Buying a Foreclosure
Those wondering how to buy a foreclosure need to be aware of the risks involved. First off, Foreclosure properties are sold as-is, meaning there may be repairs, back liens, etc., needed depending on the home. Next, since foreclosures are typically all-cash sales (the entire amount needs to be paid upfront), it can be challenging to secure the necessary funding.
How to Mitigate Risks
To mitigate the aforementioned risks, it’s essential to carry out proper due diligence on the property before buying a foreclosure home. This can involve driving by the home, comparing similar properties, or working with inspectors. Check out our due diligence guide to find out more about conducting research on a property: due diligence guide.
How to Buy a Foreclosure at an Auction
The first step in buying a foreclosure is to research the available inventory. ServiceLink Auction's Real Estate Auction Database is your go-to source for finding foreclosure properties. Click “Buy” in the top toolbar and scroll down to the “Foreclosures” option. This will take you to the dedicated Foreclosures Homepage. You can then enter your search criteria, such as city, state, ZIP Code, or address, into the search bar. Your foreclosure listings will appear on the Search Results Page (SRP).
You can scroll down and find your property of interest or refine the results with advanced search filters. You can filter properties by their function, where they can be found, and how they can assist your investment goals. You’ll find an extensive list of properties that meet your criteria. Then, you can click on your property of interest to access its Property Details Page (PDP). This will provide valuable resources to support your foreclosure purchase, including property reports, property DNA, sample titles, and more.
Making a more informed purchase helps to do additional research into the property. Sometimes it’s possible to have a professional inspector look at the property, but often this is not the case with foreclosures. You can look at the public records available for the property to see what it has sold for in the past and whether any permits have been drawn. A qualified real estate attorney can help you clarify the property's details.
You can also drive by the property to do a curbside inspection if you live nearby. Keep in mind that trespassing is not permitted as tenants may still be occupying the property, so limit your drive-by to a quick curbside inspection. These steps can give you some insights into the overall condition of the property and allow you to estimate whether repairs will be necessary.
The more you know about the property, the more you'll be able to set your bidding budget. Be sure to compare similar properties to understand what the property could be worth.
Attending the Auction
On the day of the foreclosure auction, bring either cash or, preferably, a cashier’s check made out to yourself in the amount of your max, or highest and best, offer. In addition, a valid government-issued photo ID is required. Review the “What to Bring to Auction” section on the Property Details Page to determine the auction requirements.
It’s essential to do your research beforehand and arrive early to the auction. It would be beneficial to choose multiple properties within the auction in case a postponement or cancellation occurs if you are the winning bidder, congratulations! In most cases, you will need to tender funds immediately to the sales agent. They can walk you through the remainder of the process and answer any questions.
Your Trusted Resource for Foreclosure Properties
For those wondering how to buy a foreclosure at auction, ServiceLink Auction is committed to providing an efficient and easy-to-use platform for investors. In addition, we like to provide informative resources so that prospective buyers can make the best bid possible. Whether you’re looking for a foreclosure property or any of our other auction program offerings, we help you be a better investor, one bid at a time.
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