Home auctions and foreclosures, a guide to success

Home auctions and foreclosures, a guide to success.

The current economic crisis has not sidestepped Real Estate. As most sectors, Real Estate is feeling the crumbling weight of a depression and the credit crunch. However the sales rates of February for both new and used homes in the United States were  a pleasant surprise for most of us. The reason for this increase in the sales rate was not an improvement in the economic situation as such but a reaction to basic economic forces, namely offer and demand. In fact one of the major reasons observers have put forward to explain the increase in sales is the drastic freefall home prices have experienced. The main force behind the drop in prices is the rise in foreclosures and short sales, which has led to an increase in home auctions. People who have cash or have access to cash can now reap the benefits of investing conservatively.

In fact we don´t have to be millionaires or even wealthy to invest in home auctions and foreclosed houses, and this article aims to explain the basics of how to do it. But first of all let´s start with the basics, what is a home auction? A home auction is not a kind of home, or mortgage but a way to sell a house. ¨Normally¨ homes are sold through an agent or broker through a negotiation. Home auctions, however, follow the structure of an art auction where a minimum price is set forth and the bidders offer increasingly large amounts for the house, or not. If there is a large interest on a home the price can increase exponentially and even get a good to excellent price. Nevertheless most homes go for extremely discounted prices because the owners are struggling to sell the houses, which is why they put them on the auction market to start with. This has especially been the case with new homes. Because of the state of the economy many home builders are finding themselves with a large inventory of homes they cannot sell. To solve this problem they organize a home auction day where their hard to sell homes are put on auction.

If you are interested in buying a home off an auction it is VITAL to do your homework. The rules change from one State to another and even the auction rules change. However most of the time if you buy a house on auction you are legally bound to the contract, oral as it may be. Find out the prices of homes in the area, what amenities are included, what are the crime and noise levels. Make sure you understand what repairs and maintenance the house needs.

Then before actually going to the auction arrange a line of credit or pre-arranged mortgage with a finance provider. This way you will know how much money you have available and how far you can bid for. Having a set maximum will help you not get carried away with the bidding war and keep a sensible view of the big picture.