OfflineThere is some increased competition at area foreclosed home auctions, however, as traditional sales are rapidly finding multiple offers on the same properties and making it difficult for non-cash buyers to get an acceptance. Yet there is a bright side to home auctions, and that is the fact that lenders are guaranteed to accept the best market offer at the auction, and buyers that do their homework and arrive with lender financing from the auction-approved lenders will find a successful transaction.
For best results at Southern California foreclosed home auctions follow these basic rules:
1. Register with the auction company. Most auction houses have online forms where prospective bidders can register. This will also put you on their mailing lists so that news of upcoming foreclosures auctions is sent your way.
2. Understand the earnest money deposit. Each auction house has different rules but most require a minimum deposit on auction day of at least $5,000, or 5% of the sale price. Come prepared with a cashier's check payable to yourself on the day of the auction.
3. Take advantage of the pre-auction inspection dates. Bidding on a property sight unseen is dangerous and could end up costing you significantly in terms of repairs and other improvements that might be required just to make a home inhabitable.
Real estate auctions offer prospective home buyers one of the best opportunities to own one of the many Southern California foreclosures still available. Lenders are working hard to clear their inventories of REO properties, and using the major auction houses to hold massive multi-property auctions is a fast an efficient way of selling dozens or more foreclosures quickly. If you find you're shut out of the traditional buying route, consider bidding at a foreclosed home auction in your area.
“Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light not our darkness that frightens us. Actually, who are you not to be? You are a child of God. Your playing small doesn’t serve the world. There’s nothing enlightened about shrinking so that other people won’t feel insecure around you. We were born to make manifest the glory of God that is within us.”
- Nelson Mandela
Be very careful not to get swept away at auctions. Most bids that are won are usually rejected and sent back to the auction block. You might think that great deals are being made, but the devil is in the details. Banks are behind this sinister way of selling properties. You see, all those properties at auctions are bank owned (REO). Banks place a minimum reserve amount on each property, usually no more than 10-15% off FMV, and that's only because it's probably in need of major repairs. When the winning bid is presented to them they can reject it without recourse because it did not meet their reserve amount. The unsuspecting bidder thinks he won and goes home with a wide smile, only to get a call the next day informing them of the rejection. The naive spectator starts to salivate at all the great deals and wants in on the action.
By the way, those who actual buy at auctions, well they pay almost what the FMV on the property is. They do not get deals. Banks say yes only to the ones that meet their reserve. No reason for banks to give away things that they will lose money on.
We always hear that banks are not in the property management business, but think about, banks are also not in the money losing business either. They employ the best and brightest MBAs to make them money, not give it away at some loud-mouth-carnaval-style auction.