Despite forbearance programs set in place to relieve mortgage tensions during the COVID-19 Pandemic, it’s a commonality that all US economic recessions have in common: An eventual spike in home foreclosures.
But what about those in the fortunate opposing position? A “good deal” is hard to ignore! So if you find yourself interested in raising your paddle, below are some tips and tricks to what foreclosure auctions are all about.
1. Bring the funds with you. This must be in the form of cash or a cashier’s check.
No personal checks, pre-approval letter, or nana’s famous carrot cake. These won’t cut it.
Because you pay directly on the spot upon winning, you don’t want to overpay as it will take approximately 30 days to get that refund. Instead, if you’re coming with a cashier’s check, come with multiple denominations so that you can add them together to create the appropriate amount. Also, have them made out to you so you can deposit the leftover checks back into your bank account. If you win, you simply sign them over.
If, however, you are in an online auction, you have a bit longer to come up with the funds.
*Some companies charge a percentage of the final sales price as a buyer’s fee. Be sure to ask about this, or read the fine print.
2. Do your research: Foreclosures are sold “AS IS, WHERE IS, NO PROMISE OF ANYTHING.”
There is no guarantee of a clear title, functioning plumbing, electrical, structural issues, etc. You must do your due diligence to make sure you know what you may be purchasing. Liens on properties are public record and can be found online or at the local courthouse. Do not skip this step!
3. Opening bid does not necessarily mean you can get the property at that price.
This number is normally set by the foreclosing lender, and it is usually the assessed loan amount owed to the lender. Sometimes, the opening bid is simply an estimated minimum by law that includes only taxes delinquent on the date of judgment, or a number that the creditor believes will spark interest. This minimum bid can be just a tool to get the bidding ball rolling – but if the bids do not reach the creditor’s bottom line, then the property will not sell and will go back to the creditor to do with it what they choose.
4. Purchasing an occupied foreclosure.
If the owner does not vacate the property after the foreclosure sale, as the new owner, YOU must give them a formal notice to move out. If they do not, you have the right to bring on an eviction lawsuit. If the person occupying the property is a tenant of the former owner, a different form of action must be taken. There are certain laws that actually protect these types of tenants. It all comes back to doing your research before you purchase so you know what you’re getting yourself into.
5. If you’re the one bidding, you’re the one buying.
There is an exception: By signing a Power of Attorney, you may appoint a representative to bid on your behalf. Sometimes, auction companies may offer live remote bidding by telephone through an auction representative or have live Internet bidding capabilities. There are options if you are unable to attend an auction.
6. If the auction begins at 10 am, be there at 9:30 am.
Auctions in Texas are the first Tuesday of every month, on the south side of the County Courthouse. The auction may only last 10 minutes total, so be timely, or you may miss the whole thing!
With that said, Texas law requires a three-hour window from the time given on the auction notice and when the auction actually takes place.
If foreclosures are something that interest you, final words of advice would be: Save your money, do your research, and don’t be late. Happy bidding!