How do Courthouse Foreclosure Auctions Work? What to Know Before You Make a Bid
If you are a real estate investor on the prowl for a new investment opportunity, then the steps of your local courthouse may just be the best place for you to start your search for your next property. However, buying foreclosures at auction can be a rather complex process, and there are a few things that bidders should know before they arrive to make sure they are making a smart investment and are fully equipped to handle the process.
Understanding What A Courthouse Auction Property Really Is
While many people want to go bid on courthouse auction properties, many of these people don’t actually understand what these properties are and what their ownership status really is. Right until the final bid is accepted, the house that is being auctioned off is actually property of the homeowner.
This is not a traditional foreclosure, where the bank owns the property—it is more of a pre-foreclosure.
The most important thing to remember with this very big difference, is that with auction properties, the owner can still reinstate their loan. Reinstatement, or bringing the loan to current status is typically allowed in most states right up until the initial courthouse auction. There are even some states that have a longer “right of redemption period” for homeowners that are in this situation. In short, don’t think that the auction is necessarily a done deal as the homeowner still has the opportunity to catch up on their payments.
Another thing to remember is that the homeowner can actually sell the property, right up until the final bid on the property has been accepted. This is why so many people talk about how wild and unpredictable courthouse auctions can be.
Tips on How to Get in on A Courthouse Auction
If you want to try your luck at a courthouse auction and see if you can get a great deal on a great investment, here are some tips on finding out about upcoming auctions.
- Courthouse auctions are required to be advertised. Typically, this means listings being published in a local newspaper about three weeks before the scheduled auction date.
- Remember, that many auction sales are postponed, cancelled or rescheduled, so you will need to monitor these auctions to stay on tops of them.
- You can look in third party websites for more information on auctions, or you can visit the courthouse to see the posting of upcoming properties.
Before you go and start making bids, you can consider going directly to the owner and making them a “pre-foreclosure” offer. This is great for the seller as it can help them avoid having a foreclosure on their record, while still letting them retain some equity. It is also great for you as the buyer because you don’t have to bid against the competition and you get to inspect the property.
If this isn’t an option, then you will need to make sure that you assess the financials of the property and the title. Have your financing lined up before hand as well. At some auctions you will just need to pay a deposit if you win—others you will need to have the full amount of the property available.