PRE-AUCTION PRECAUTION

PRE-AUCTION PRECAUTION

Buyers ask me all the time what I think of or know about Bank Foreclosure Auctions.

I know it kind of goes like this:

Bidders must register (usually online) and get pre-qualified with a lender before attending the auction. Even if they're paying cash.

Bidders are given a catalog of the homes to be auctioned. They select from the catalog which homes to go and see at an Open House to be held approximately 2 weeks before Auction Day.

This is their opportunity to have the home or homes inspected at their own expense (between $300 and $500 per inspection). Bank owned foreclosures are sold AS-IS, so it's always in ones best interest to have them done.

Bidders must be prepared to bring a Cashier's Check in the amount of $5,000.00 to the auction. If they win the bid, a 5% premium is added to the home price and that total becomes the Bidders actual purchase price.

The winning Bidder then signs confirmation that he/she has won. If financing and not paying cash, the application for full loan approval process is kicked into gear right away. The Bidder then waits to recieve an answer from the seller (bank) as to weather or not they accept the offer. If they do, they will ask you to close escrow in 30 days.

Here's the precaution:

Prior to the home going to auction, the seller (in this case the bank) will already have established an undisclosed minimum selling price, or "reserve price". The starting bid is not the "Reserve Price", but what ever it is, Bidders must meet or exceed it. Otherwise the home will not sell that day and the bank is likely to put it back on the market.

If the buyer goes through the lender designated by the auction, but can not get approved, then they'll get their money back. If using their own lender (an outside lender) and can not get approved, they may not.

If they find something wrong with the home after they win the bid, they may have no choice but to move forward.

On the whole however, if you know and understand the drill. If you have done your homework, have read and understand the terms and conditions of the auction and buying process, it's possible to save some money. I question weather it's enough to justify the limitations of the process. If you're determined to go, take your REALTOR with you to be sure you're represented by a professional. Good Luck