Foreclosure Auction Properties Can Be Very Profitable If You Follow These Steps...

Foreclosure auction properties can be great deals if you buy them the right way. There are a lot of things happening at the auction and so let's talk about how to make sense of this.

The foreclosure auction is the second step in the foreclosure process. If the homeowner is not able to bring the loan current, the lender is going to foreclose on the property. Once the property is foreclosed on, there will be an auction on the property.

Some states will call this a sheriff's sale, and other states will call this a trustee's sale. It really does not matter what it is called as the same thing is going to happen. Usually, the bank that foreclosed will place the opening bid on the property. Their bid is normally whatever is owed to them on the loan plus the fees that they incurred in the foreclosure. This way, if anyone bids higher than the bank, that person will get the property, the bank gets their money and everyone is happy.

If no one bids higher than the bank at the foreclosure auction, the bank will take back the property and try to sell it themselves. That is the third stage of the foreclosure process which is bank owned property.

So, is the foreclosure auction a good time to get involved? It really depends on the type of resources that you have available. There are several challenges with buying property at the auction:

1. You will not be able to walk through the property and inspect it. Make sure that you are buying it at enough of a discount to handle any kind of repairs. 
2. Make sure you do a title search prior to bidding. In some cases, there will be existing liens or judgments on the property. If you buy one of these properties, you are also buying the other liens on the property. Do your homework before bidding on the property. 
3. Most counties require that you make payment for the property in a short period of time. This is the big problem that keeps many investors away from the auction. As an example, one county requires a $5000 deposit just to be bidding on any property. If you are the highest bidder, they will require that the remainder of the money be paid in 24 hours. So, the problem is that you do not have enough time to get financing. You must have cash, or a credit line, or a partner that you can access quickly. 
4. Some bidders at the auctions are professionals and will protect their turf. We have seen from experience that investors who specialize at the auctions know each other and are very protective about newcomers. We have seen them bid up properties at the foreclosure auction just to ruin the deal for the new person so that they do not want to come back. 

There can be some great deals at the auction. The main obstacle most investors face at the auction is having the financial resources to be able to pay for the property in a very short period of time.

If you do not have the financial resources to bid but you still want to get involved at the foreclosure auction, there is another alternative. Once the bidding is done, you can approach the winning bidder and offer to buy the property from them. Since you are buying the property from the bidder instead of at the auction, you will have time to get financing and buy the property the way you normally would.

If you address the four issues above prior to going to the auction, you can purchase some properties at a large discount. These can be great deals at the foreclosure auction but you have to know what the rules are for your county since each county handles them a little bit differently.