Buying Foreclosure Homes at Auction

Buying foreclosure homes is a great way to make fast (and often very large) profits in real estate. One method of buying foreclosures is to bid on them at the Sheriff’s auction.

If you opt for buying foreclosure property at auction, here are some tips for maximizing your success:

Arrive early
Keep in mind when buying foreclosure properties at auction: Auctions can be over in a matter of minutes. If you arrive five or ten minutes late, you may miss the auction altogether.

Check the condition of the property in advance
Buying foreclosures can be profitable, but only if the property won’t drain you of resources. When buying foreclosure properties, the less you know about the real condition of the property, the more conservative you should be with your refurbishing estimates.

Think about what you'll do with the property if you win the bid
When buying foreclosures, knowing what you'll ultimately do with the property should influence how much you bid. No matter what you intend to do, one suggestion when buying foreclosure property is to consider what price you would need to pay if you had to quickly resell the property.

Be prepared with the right amount of cash
An important thing to remember when buying foreclosure property: Your bid is final – you won't be able to back out. Set a limit on what you'll bid, and go no higher. Find out beforehand how much money you'll need on the day of the auction if you win the bid. You'll usually need 10% of the bid, with the remainder due within 30 days. In some states, however, you'll need the entire amount on the day of the auction.

Understand how the auction is run
Buying foreclosure property at auction requires familiarity with how the auction is run. The foreclosure auction usually takes place at a public location such as a courthouse, and is usually run by the county Sheriff or deputy.

As with any auction, the property goes to the highest bidder. Sometimes, no one attends an auction but the lender representative and the auctioneer. Buying foreclosures at auction is only worth bidders' time if there is a good deal of equity in the property.

Ada Smith is an author and pre-foreclosure investor.