Seasoned investors may already know the benefits of buying properties at auction, but if you’re new to investing in foreclosure sale and bank-owned properties, it can be a challenge to determine which solution is best for you.
First, you need to choose between foreclosure sale or bank-owned properties. There are distinct benefits and disadvantages inherent in each type of property, so it’s important to have an investment strategy before putting up your hard-earned cash.
FORECLOSURE SALE AUCTION
If you enjoy the competitive thrill of attending an auction in person, foreclosure sales might be right for you. Most commonly held at the courthouse, in a ballroom or at the property itself, many foreclosures sell below market value. Not to mention, you’ll save even more by avoiding the 5% premium sellers require in most bank-owned auctions. This makes buying foreclosure properties a lucrative way to start building your real estate portfolio, especially if you flip these discounted assets for a nice profit.
Yet, such profitable opportunities come with other considerations. Most foreclosure properties are still occupied by the previous owners or tenants, meaning you will need to initiate the eviction process or negotiate a lease agreement. Occupancy also means you are buying site unseen and will probably not have an opportunity to assess the interior condition before purchasing the property. In addition, some foreclosures come with hidden liens from unpaid taxes or HOA fees that the winning bidder will be required to pay. These added costs can make it a challenge to know which properties are a bargain and which may incur a loss. That’s why doing your due diligence is crucial.
To find foreclosure sale properties, start by browsing the tens of thousands of foreclosure properties at Auction.com. You can easily save your favorite properties and begin the process of reviewing any associated documentation, such as the Title Information and the Property Inspection Report. You will also want to check out the property—even if it’s from across the street—to take photos, explore the area, review price trends, and research the neighborhood to gain a deeper understanding of the potential for growth in the area.
Once you have selected a target property, you’ll need to get your funds in order. As a rule of thumb, it’s a good idea to allocate an additional 5 – 10 percent of your budget to increase your odds of winning. Most foreclosure sales require that you pay in full at the time of purchase, so we recommend bringing a cashier’s check for your security.
Our live auctions are staffed by helpful team members, so feel free to ask questions or address concerns. Look for us in our green Auction.com shirts; we’re here to help!
BANK-OWNED AUCTION
If you prefer the ease and convenience of shopping online, bank-owned property auctions could be the way to go. Bank-owned properties are typically sold through online auctions and are owned by the lending institution.
With thousands of listings, Auction.com makes it easy to find and bid on the bank-owned property of your choice, be it in your neck of the woods or across the country. Some properties even offer real estate commissions, so ask your agent or broker to register on the site if you have one.
To get started, simply create an account, browse and research properties, then register to bid. Unlike foreclosure auctions that require you to pay in full immediately, bank-owned auctions require you to place a $2500 deposit in order to bid. Regardless of the outcome, your deposit will be released once the auction ends.
In some cases, a 5% Buyer’s Premium (or $2500, whichever is greater) may be added to the winning bid amount to establish the total purchase price, so it’s a good idea to allocate an additional 5-10 percent to your budget. Occasionally, some bank-owned properties will give bidders the option of financing the property, but you’ll need to secure these funds before the auction begins.
Before you bid, you’ll want to research the property just as thoroughly as you would a foreclosure sale property. Fortunately, Auction.com provides many of the pertinent documents you’ll want to review for many of the listings.
In addition to reviewing all of the documentation, you’ll also want to drive by, take pictures, and investigate the surrounding neighborhood for signs of growth or blight.
It’s important to note that the closing and contracting process for bank-owned auctions differs from that of foreclosures. While closing occurs at the live auction for foreclosure sale properties, you would work with our supportive contracting and closing teams for bank-owned auctions. We will provide you with convenient tools to walk you through the process.
From sending email notifications confirming your purchase, to assigning a contract specialist that works with everyone involved, to using DocuSign to sign and store all of your important documents in one secure location, Auction.com works hard to ensure a smooth transaction for buyers and sellers.
OPPORTUNITIES ABOUND
No matter which type of property you choose, Auction.com has over 30,000 properties available on our platform from all over the country. As the nation’s leading online real estate marketplace, we work hard to provide our buyers with the tools you need to be more informed and bid with confidence. To learn more about our auctions, or for a step-by-step guide to help you understand the process, visit ourLearning Center. Happy bidding!