In the softening real estate market there are a steady number of homes that are being sold at public auction foreclosure sales. The weekend issues of local papers contain a dozen properties that are about to be sold at high noon on any given Saturday. The properties often go for what appear to be very inexpensive prices. Is such a purchase a wise move for you?
The purchase of foreclosed property at a public auction sale carries many risks with it. The buyer does not have many of the safeguards that are automatically or often involved in a typical arms length transaction. The property is sold in "as is" condition with none of the statutory warrantees that are otherwise mandated by State law.
You are required to have a substantial deposit (10% of the court appraisal value of the property) in order to participate in the bidding process and you must purchase the property within thirty days of the Court's approval, if they approve it!
There is no "mortgage contingency" clause to protect you from losing your deposit if your lender chooses not to provide you with a loan to buy the property. You do not receive title via a Warrantee Deed so you only get whatever title the foreclosing party has subject to any prior liens or encumbrances that predate his interest.
You take title subject to any outstanding real estate taxes, water and sewer liens or similar unpaid debts that attach to the property.
Participation in an auction sale can be exciting and may even cause you to pay more than you otherwise might have. The auction is conducted by an attorney appointed by the Court know as the Committee of Sale. Bidders register and are usually afforded a couple of hours time before the sale to inspect the property but unless you have a background in construction you may not have the expertise to discover hidden defects.
The bidding follows the same pattern as any auction with the bidders increasing their bids until only one bidder is left... and they are the winner.
The upside of a foreclosure sale purchase is usually getting the property for a "good" price. In order for you to determine what a good price is though you need to do your homework and learn as much about the property as you can. Check the land records, the assessor's records, call the Committee, call local real estate agents to inquire as to typical prices for similar properties in the area and drive through the neighborhood.
Attend a foreclosure sale just to get a "feel" for it. You can not know too much about the property before you bid on it! Above all make sure that you have the funds to buy the property if you are the successful bidder.
An experienced attorney can be a valuable source of information and assistance if you choose to attempt to purchase a property at a public auction foreclosure sale.
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