If you're considering buying auction properties as an investment
, you may want to think twice. It's unlikely you'll be able to get one of these properties for as cheaply as you may be thinking, and there are hidden risks that make buying auction properties a distant second to buying tax foreclosure properties directly from owners.
The first big risk of buying auction properties is that you aren't allowed to inspect the property beforehand. This is fairly self-explanatory. If you can't see the inside (and can only see the outside by driving by), there could be serious problems that limit or eliminate your profit potential. Or worse - you could end up losing money fixing whatever problems it has.
The second risk you take is that you'll be paid off by the owner during the redemption period. While this doesn't pose a huge financial risk - you'll get your money back, plus interest - you do risk wasting your time and making a little in interest instead of a lot in profit, which is the whole point.
The third isn't a risk so much as a negative aspect. There is simply too much competition at auction to get a really good deal on a decent property. Buying tax sale properties is no longer a way to get a property for a fraction of its worth. Good properties will sell for near retail value.
The only surefire way to make a good return on a tax property is by approaching the owner at the end of the redemption period (after tax sale). By then, stubborn owners will be ready to deal, and lazy owners will be ready to move on. It's during this time period that you'll find owners who are ready to be done with the ordeal and who are willing to sell you their deed for as little as a few hundred dollars.