Frequently Asked Questions about purchasing homes at foreclosure

Make sure that they give you a Special Warranty Deed, not just a Quitclaim Deed.

How can I find out as much as I can about the property?

The primary sources for information are county assessors and recorders offices, title
companies, the trustee, a real estate agent and the owner. You may also be able to gain
a wealth of knowledge from a neighbor.

How can I find out what’s on the preliminary title?

Experienced foreclosure buyers have established relationships with title companies
where they can research information on distressed properties and then will use the title
and escrow company when they purchase properties. Many investors also purchase title
information from the trustee because the winning bid at auction may be subject to other
liens in some cases. If the loan in default is the senior lien, then any other liens will
typically be cleared out for the highest bidder at the auction (confirm this with a local real
estate attorney or the trustee). If the loan in default is a junior lien, then the highest
bidder will hold the note to that lien subject to any senior liens against the property.

How do I bid on an Auction property at a public sale?

The sale usually takes place at the. county courthouse. The trustee usually provides the
date, location and opening bid. The majority of trustee sales require you to have certified
funds in the form of cashier’s checks. The property will be sold to the highest bidder at
the auction and typically the trustee will prepare a trustee’s deed that transfers the title to
the purchaser at the trustee sale. Often you will be required to have the full amount you
want to bid at the auction, but that varies so check with a local real estate attorney.

Who will I be competing with at an auction?

When bidding at the auction, you compete against the lender, other investors, and even
some first-time homebuyers, especially when the home is in a desirable neighborhood.
What does it mean if the foreclosing lender does not bid at the auction?
If the foreclosing lender does not bid at that sheriffs sale or auction, it probably doesn’t
-, want the property. This may be due to excessive superior liens, such as IRS or tax liens .
. Some investors say that if the lender doesn’t bid for the property at auction, you probably
shoulon’t either.

What are the risks involved with bidding at a foreclosure auction?

Auctions are frequently postponed, wasting your time and effort. It is rarely possible to
inspect the property. To be safe, you should have a title search performed, which can be
costly if you are trying to research many properties. Unusually large cash outlays deter
most investors (note that this can also be seen as a benefit). Certified checks for 10 of
the purchase amount may be required with the balance due in weeks, days or even
hours. Improper research in any of these areas can lead to devastating results.

What is the biggest mistake to avoid?

Paying more than 70 of value for a property. Calculate a property’s potential bargain
based on market value, outstanding liens and repair costs. If the profit isn’t there on a
particular property, move on to the next one. Realize that every property you check out
is not meant to be a deal. Likewise, every deal you come across is not necessarily a
good one. Conduct your analysis carefully and accept the bottom line when you derive it.

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