How do people actually turn a profit in the real estate business? Foreclosure auctions are often where many people find the deals that bring in their big profits. Think of the real estate business like you would the stock market, where you need to get a low buying price and sell for much higher to get ahead. Participating in a foreclosure auction is a great way to buy low.
Learn the Market
There are services easily accessible which show foreclosure auctions happening in every state, but it is a mistake to blindly buy property in a market you aren’t familiar with. 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.
Bidding Etiquette
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 most states, the homeowner will have around a month to find a buyer before the auction. It’s often much easier for banks or the government to deal with sales of foreclosed property than an auction.
If things don’t work out, you can still bid on the auction. Once you locate property you are interested in, you must determine which realtor is handling the auction and find out the details, such as if you are required to show up or if you can call in a bid.
It’s not up to the owner of the property to let you know all of the gory details. It is essential that you first acquaint yourself with the state laws for foreclosure auctions in the state you will be bidding, since they are different in every state.
Deciding How Much to Bid
A general guideline is to bid around twenty percent less than the market value for the property. Estimated market values are listedin valuation reports which are public record. You need to at least inspect the property with your own eyes, or even better hire an inspector, because there could be major flaws with some properties. You don’t want to turn a foreclosure auction bargain into a loss of money if there are serious flaws with the property which will cost a lot to fix.
Remember that you need to have the money ready to go for whatever amount you bid, because you typically won’t have much time to get it paid for. Consider how much money you can afford right away when deciding how much to bid.
