A property auction generally falls into one of two categories – foreclosure auction or tax lien auction. Buyers come to a property auction hoping to get a good deal. The starting price may be the remaining balance on the mortgage or a lower amount in order to spur bidding.
Here are some tips to help you succeed at buying a home at an auction:
Know how properties wind up at auctions
Property auctions take place when the homeowner can’t keep up with mortgage payments and is unable to settle the balance or renegotiate the loan. Other reasons include failure to pay property taxes and severe state or local income tax delinquency.
When it comes to foreclosure auctions, lenders aren’t allowed to profit from the deal. Homes are often sold at a loss, but if there’s profit, it goes to the homeowner after the mortgage and liens are paid off.
Do some research
Come up with a list of homes that are going up for auction in the area of your choice, and determine the minimum bids. Take time to pass by the neighborhood and assess the home from the outside to get an idea of how much you should bid. There are auction companies that organize open houses so that you can walk through the property before auction day.
You can even arrange for an independent valuation that can help you decide how much you’re willing to pay for the home. This kind of prep work will keep you from overbidding and rushing into a home purchase.
Bring an ID and other requirements
Buyers who want to attend a foreclosure auction in San Diego should bring a valid ID with photo, some cash, a cashier’s check, and a personal check that covers at least three percent of the final cost for down payment. The cashier’s check serves as proof of financial obligation. Trustees require a cash deposit before bidding even starts to help ensure that bidders will be able to follow through with the purchase.
Bring a pre-approval letter, which acts as proof that you have the funds to purchase the property. Getting pre-approved for a loan prior to a scheduled auction enables you to take full advantage of a trustee sale.
Keep a level head during the auction
During the auction, sit or stand in a prominent spot and speak in a clear, loud voice when placing a bid. This signals confidence and shows other bidders that you’re serious about making a purchase.
Don’t let excitement get the best of you. Stick to the plan and budget, and stay in your comfort zone. You can simply set your price limit at an odd value. For instance, set your limit to $906,650 as opposed to $905,000 to increase your chances of securing the home. You can also consider hiring a professional bidder if you think nerves will get the better of you.
Remember that a home purchase is a major financial transaction, so come prepared and bid with caution. The guidance of a real estate professional will help you avoid the common pitfalls. Click here to contact me or you can call/text me at 760 622 5087.