I am asked on a regular basis how to buy a home at a foreclosure sale so I thought I would compile a few thoughts and warnings. I have purchased a few homes in this manner, but it is a MUCH more stressful process than the “normal” purchase of a property.
1. Have Cash
To buy a home at a foreclosure sale you must have the ENTIRE purchase price available in cash. At the sale you will present a cashiers check for $5,000 (Occasionally more or less) and then wire the balance within 24 hours. This means that the money cannot be in a stock trading account, or any other account that requires 2 or more days to get access to. I believe Jane Austin referred to this as “Ready Money”.
This is the number one key to being successful in a purchase. If you are just buying one or two foreclosures you must realize that you will be going up against professionals that buy these homes and usually turn them for a quick profit (hopefully). The only way you can win is if you have MUCH more information than any other buyer at the auction. A lack of accurate data will kill you, and making guesses and assumptions does NOT count as data! There will be a lot of uncertainty no matter how much research you do so be fully prepared.
3. Take your heart medicine
Not a bad idea even if your heart is fine. The auction is NOT like what you expect. You should probably attend a few sales before bidding so that you can become accustomed to the dry attorney style that you will face. It goes something like this:
Attorney: Blah Blah Blah blah, legal description, Blah Blah Blah, Opening bid is $xxx,xxx
You (in your mind): Wait…is he done? what now.
Attorney: Do we have any bidders on this property?
You: Now? Yes I want to bid…feeling stupid as people go up to the attorney. Now lost and confused and not sure it is the right property.
Trust me, you must stay calm to get it done!
Above all else, you should be mentally prepared so attend a few auctions when you don’t “Have a dog in the fight” or more accurately, a house you want to buy. I am always happy to help if you decide to embark on the adventure. Never hesitate to call me.