How to Buy Your Dream Home at a Foreclosure Auction, Part II

This is Part II in a four-part series on buying your dream home for a fraction of its worth through foreclosure auctions. This is one instance in which dreams can come true if you are willing to put in the legwork doing research.

You can buy your dream home for a low down payment, and a total of pennies on the dollar. All of the information you need is public record. Translated: free.

In Part I, I discussed how to find the home you want to bid on at auction. In Part II, I'll discuss what you must know once you find a home you are interested in bidding on.

***

I've been a journalist most of my life, but for the last two years, I've been working with foreclosure auctions. Based on the question I've been asked during that time, it's clear to me that most people---amazing, that includes real estate agents as well. If you have any interest in bidding on a foreclosed property at auction, you can't afford to know how these things work.

It's always your problem. The reason you do all of this beforehand is, because if you cannot secure financing,

that's your problem. Read the fine print of that property's newspaper advertisement. Here's what you find out generally: if you win a bid, then can't go to settlement, the property may go up for bid again. You lose your deposit.

That's NOT the whole of it. When that property goes up for auction again, the winning bid may be LESS than what you bid. Well, according to the contract we have, you may be held liable for the DIFFERENCE between the amount you agreed to pay and the amount it sold for the second time.

Track the property. While you are doing your research on the worth of the property, keep an eye on the actual status of the sale. Foreclosures are cancelled all the time. We tell people to check on the status of the sale right before they leave their homes for the sale. We may receive notification of cancellation of the sale from the attorney as our auctioneers are standing on the courthouse steps. People always ask for the "why" behind the cancellation. Again, that's something you will rarely find out. Generally, sales cancel because the person makes a payment deal with the bank, the person brings the mortgage up to date or the homeowner has declared bankruptcy.

Keep tracking that property. Just because the sale was cancelled THAT day, doesn't mean all is well for the homeowner. If you really want that home, keep checking the Web sites and doing searches on the newspaper sites where that sale was advertised the first time. For a huge amount of the sales cancelled, the sale is rescheduled for a future date.

You bid, you buy. Another bulk of questions we hear is in regard to people who want to buy the home for someone else---a child or the like. They want to know if they can bid and buy the home, but put someone else's name on the contract. No, unless you have gotten a legal power of attorney for the person. This is something you must discuss with the attorney absolutely. Do not assume anything.

How will you pay? If all goes your way and you win the sale, you must be prepared to pay the deposit right there. The ad will spell out the monetary instruments allowed to purchase the house. Generally it says something like: cash, certified cashier's check (whereby you give the bank money and the bank makes out a check from itself) or certified money order. You cannot write a personal check for this. Also note that even though the ad may say "cash," some attorneys are not comfortable taking greenbacks. They're standard of cash may be the certified check. If there is any confusion, verify this with the attorney's office before the sale.

Be ready for any curve ball. You may have kept your options open and have a few properties you'd like to bid on, just in case you miss the one you really want. The deposits for each property will probably not be the same, so what can you do? You can always have MORE than the amount of the deposit for the property, but you can never have less.

Get the deposit for the highest amount you'll need. Have the bank make the payment instrument (i.e. certified money order) made payable to you. Sounds odd, to be sure, but here's the logic---if you don't win any of the bids or don't bid for whatever reason, you can simply endorse the check, etc. back to yourself, and deposit it back into your bank account.

In Part III, I'll detail in depth the financial aspects of buying a foreclosed property It's entitled:

Buying Foreclosed Homes at Auction,

Part III. How Much is it Worth, and How Much Will it Cost? What really goes into determining how much that foreclosed property will actually cost you? The price you bid is NOT the cost of the home, not by a long shot.

Part IV picks up on the courthouse steps where most sales occur. It's all about what you need to know about the actual sale process before and after the sale has been called.

Part Four is entitled:

Make Money Buying Foreclosed Homes at Auctions, Part IV. At the Courthouse---Before and After the Sale.

***

If you have a question, please leave it in the comments section or send me a message privately. I will include it in future articles. As the old adage goes---there are no stupid questions.