Your Guide to Buying a Foreclosed Home at Auction
One man’s misfortune is another man’s gain. When it comes to buying a foreclosed home, nothing more true could be said. There are two common ways foreclosures happen:
- The owner defaults on mortgage payments for 60 days or more.
- The owner owes back taxes.
After payments are not made, the lender will begin sending letters, notifying the owners of being in default of their loan. A final letter again declares the owners to be in default
, along with the time and date for the property’s auction.
Why Are These Homes So Cheap?
For the bank, the auction is to recover the money lost by a buyer
in default. The money has been borrowed, not given back, and the bank is only left with the property and their main mission is to get the home to sell quick, without a loss to them.
You Should Know This About Auctions
Auctions are quick, final and have a few set of standards that you’ll need to know. First, like any home buying decision, the first thing to do is to get pre-approved. The bank will not lend another person money, especially for a house in foreclosure, without pre-approval at the least. Once the pre-approval has gone through, you’ll want to try and get the cash in your account.
Will You Need Money Up-Front?
Depending on the area, you may have to have a cash deposit at the time of the auction or you may be required to pay in full upon winning. Its best to do some research regarding how your local government handle foreclosure auctions.
Buying a foreclosed home will generally save you a ton of money. If you're looking at auctions, be prepared before you start bidding. Find out if you'll need to have an initial deposit ready at the time of purchase, so that you know exactly what you can afford.