Demand for real estate significantly decreased in the third quarter. Some of the reasons are:
- an increase in real estate prices for new homes
- households experiencing decreased income due to Covid-19
- increased unemployment rate because of the pandemic
Buying property is still problematic, even though the real estate sector experienced stagnation in some states before the pandemic. Probably that’s the reason why recently, bank foreclosure auctions became a hot topic. However, only a few know how to win foreclosure auctions.
What Are Foreclosure Auctions?
The purpose of the foreclosure auctions is to get the highest possible price for the property so it can cover all the expenses the lender carried from the borrowerю For example if a borrower could not pay the loan. There are a few things that make foreclosure auctions different from traditional auctions.
- Foreclosure actions are organized by banks, while traditional ones can be organized by public and private companies.
- Foreclosure auctions usually require cash.
- If the sale amount covers all the mortgage, the surplus goes to the borrower.
- Some states require foreclosure lawyers to close the deal.
Stages of Foreclosure
The exact process of foreclosure is different from state to state. We suggest making a foreclosure attorney consultation before purchasing any property. Hence, if you are in trouble, lawyers can provide foreclosure help to contest the action and even raise defenses.
All in all, they are quite popular, and if you are about to experience it, you should know what awaits you. The process is usually as follows:
- A person enters into “default” and gets a notice. “Default” means you are late for the mortgage payment.
- Foreclosure filling. Lender files a lawsuit against the borrower, it can also be called a “complaint”.
- Notice for a foreclosure and sale. The lender sends the notice to the borrower that the process has begun.
- Eviction. After the sale of the property, the former homeowner should vacate the premises. And in this stage, many “new homeowners” face the problem. The exact process for evicting depends on the state. Sometimes, it can take three months and more.
How to Find Foreclosure Auctions
Luckily, in the digital era, everything can be done online. You can contact your local real estate or government agencies. Besides, you can check:
- Banks websites
- Auction houses
- Real estate lawyers
However, due to the pandemic, some states may approve an online application for the foreclosure auctions only. If you want to buy properties at a low price, you need to know how to place your bid and win:
- Get to know how real estate works in your area.
- Before applying for a bid, check the requirements, such as a deposit fee (can be 10% and more), payment timing, an auctioneer’s fee (around 5%).
- Research your options. Ask if the remodeling of the property is permitted; if not, your plans can be ruined. Check back taxes, HOA fees, zoning laws. A title search is especially important.
- Estimate your budget.
- Try to register early before the auction.
- Calculate market value (times percentage of marketability, minus the cost of repairs).
- Control your emotions. If someone bid over your budget, stop bidding.
- Make title insurance.
Why Foreclosed Homes Are Cheaper
In the majority of cases, banks have to buy a property if the borrower cannot pay the mortgage. The bank is not a real estate organization, so it cannot hold a list of properties. The goal is to sell it as soon as possible.
The second reason is that real estate is usually in a distressed situation. Online housing auctions are profitable for buyers because they allow you to do without realtors. However, secondary apartments require mandatory inspection, verification of legal cleanliness, and the actual condition of the object.
All this requires time and the involvement of an agent. Doing it without foreclosure lawyers would be too risky.
Buying a foreclosed home at auction can be thrilling, but at the same time, it allows getting a cheaper property. Study the process and enlist which professional help you may need. Share your experience in action with us. Did you get something expensive for a very low price?