Tips on Bidding for Foreclosed Homes at Auctions

Tips on Bidding for Foreclosed Homes at Auctions

Getting foreclosed homes at auctions is an entirely different process from buying a home directly from a bank or from the owner. There are certain risks associated with bidding at auction, not least of which is getting carried away by the highly charged atmosphere and ending up overbidding.

Setting a Limit

The most important thing that a potential auction bidder should have is a bid ceiling or limit. No matter how tempted a bidder gets, he should never go beyond the amount limit that he has set for himself since he could end up with a property that he cannot realistically afford. Moreover, if he failed to close the transaction at the specified date due to lack of funds, the deposit he shelled out at the end of the auction will not be returned to him.

When setting the maximum amount for a bid, a buyer should consider the average price of similar properties in the same neighborhood and put a bid limit that is at least 20% below the prevailing full market price. Buyers should also consider the potential of the foreclosed homes at auctions to appreciate in value and the cost of possible repairs and renovations that these properties will incur.

Coming Prepared

In some states, bidders are required to have the full bid amount on hand before they are allowed to participate in the auction. This amount can be in the form of cash or checks. Although there are states that do not require bidders to have the full amount with them when they bid, rest assured that full payment will be required after the standard 90 days.

The good thing about buying properties from an auction is that, once the gavel has been put down, the winning bidder becomes the legitimate owner of the property. It does not matter if better offers will come along after the auction, those bids will never be honored and the winning bidder will not have to worry that the property will be taken from him.

Bidding for foreclosed homes at auctions requires careful preparation and a lot of planning. Before venturing into the world of property auction, a homebuyer should conduct a thorough research of the process first to improve his chances of winning and to avoid the common pitfalls of bidding.

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