Profiting From Foreclosure Properties at the Auctions

By: Robert Lam

Properties that are not sold during pre-foreclosure inevitably end up being offered for sale at a trustee sale or public auction. If you don't wish to negotiate with sellers during the re-foreclosure stage - or otherwise wish to invest in properties being auctioned - here are some useful hints and tips for buying at such an auction.

Firstly, I urge you to observe a few auctions before buying at one. The newspaper will publish notices containing the dates and times of various foreclosure auctions. Go and attend some of these to get an idea of what is involved.

Some of the things to note are the process of the auction, how to register as a bidder, the requirements regarding paying for a property (e.g. whether you need a cashier's check or certified funds on auction day and when you must pay the balance), and how professional - and inexperienced - bidders handle the bidding.

When you decide to participate in an auction, the main thing is to stick to your budget and not get caught up in the emotion and excitement of the auction proceedings. A representative from the bank will typically make a bid that covers the mortgage. From here, the bids will go either two ways. Up or nowhere.

Assuming that the bids go up, and you keep to the maximum amount you're willing to pay, you may or may not end up purchasing the property. If you don't end up getting it, don't worry too much about missing out. You win some, you lose some! At the very least it is a learning experience. And if you've done your figures right, you have probably avoided getting yourself into a dud deal.

Meanwhile, auctions are still great places to network with other investors and foreclosure real estate agents, which is bound to assist your business long term.

If you do end up buying a property, then - depending on where you live - you should be aware of the concept of "redemptive rights". In certain states, within a specified period of time - from a few days to a year - the person whose property was foreclosed has the right to re-purchase the property.

If these rights apply in your state, be very wary of bidding a high amount, let alone spending a lot of money, on a property you buy at auction. The last thing you want is to spend a lot on improving the property only to have it bought back. While you will be paid for the property and such improvements, you probably won't make a profit. Considering that you could have invested your money, time and resources elsewhere, this is a huge opportunity cost to be avoided.

If no one bids on the property at the auction, the bank will be forced to buy the home. In this case, the home becomes "real estate owned" (REO) and anyone who wants the property will need to negotiate directly with the bank.

For more hints and tips about buying property at a foreclosure auction, make sure you get over to my site at

Foreclosures
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