Purchasing and then reselling foreclosures can be a good way to make money. There are thousands of people across the country making money in foreclosures. Others are getting their dream homes at a fraction of the real price of the property by purchasing them at a foreclosure auction.
While there are deals to be had in the foreclosure world, understanding a little about the foreclosure auction process is important before venturing into this investment opportunity.
If you are interested in purchasing a home through a foreclosure auction, you will need to track the pre-foreclosure properties in your area carefully. When a home gets scheduled for auction, you will need to confirm the status of the auction before its scheduled date.
Often auctions are cancelled or postponed to give the homeowner a chance to pay off the mortgage. To ensure that you are not showing up for an auction that is not going to happen, call the trustee a few days before it is scheduled to confirm the date and the place. Also inquire about the bidding procedures that are going to be used, as these vary from state to state.
Before heading to the foreclosure auction, be sure that you know about the resell value of the property. The key to making money in foreclosures is purchasing homes at a deep discount. If the home is just a few thousand dollars cheaper than it will be when you resell it, you will not make enough money off of it to make bidding worth your while. Also, take some time to research the condition of the property.
If there are any major repairs that are needed, you should know these before buying the home. Decide if the repairs are something you want to do yourself, or if you want to resell the home with the problems and take a cut in your profits.
The opening bid at the auction will be set based on how much is owed on the property. Also, any fees or liens against the property will be included in this amount. Be sure that you know the opening bid before heading to the foreclosure auction, because this will help you determine if the property is worth your investment. Also be sure that you have the capital for your investment in place, because you will have to pay for the home soon after bidding ends if you win the auction.
In some states you will need to have a check with you at the auction to buy the home if you win. Finally, be sure that you know what your maximum bid is going to be. Be sure that you are getting the home for at least 20% less than its full market value if you intend to resell it for profit.
If you win the auction, you need to have a way to sell the home quickly. The longer you sit on a home, the more you will pay for owning it. Unless you are going to move into the home yourself, have some interested buyers in mind before going to the auction. Once you have the deed to the property, you can then offer it to these interested buyers and sell it before you have to pay any taxes or fees for owning it.
While you can make money through foreclosure auctions, the vast majority of those people making money in foreclosures are doing so by buying properties before they go to auction. These pre-foreclosure properties can be attained without the intense competition often found at a foreclosure auction. Also, the homeowner will be highly motivated to sell a property before it goes in to foreclosure in order to avoid the damage to his credit score and financial security.