Some investors prefer to go to foreclosure auctions, because they have no clue how to find foreclosure properties.
They are also uncomfortable dealing with foreclosure homeowners.
Through the auction, they can buy a property in a less emotional atmosphere.
However, new investors often get burned by not having enough knowledge and experience in auction sales.
While the foreclosure auction looks easy, keep in mind, there are some common mistakes can cost you a bundle.
Not doing the title research Bidding properties at foreclosure auction is a very different process from a standard home purchase.
It is common that the property has several lines such as tax line, first mortgage and second mortgage.
You might lose money if you are not researching the tile before you make any bid.
Not setting a maximum bid price Auction fever is common for new investors.
New investors usually have enthusiasm to outbid fellow bidders.
In most cases, they end up paying more than the property is worth.
Keep in mind that you can always contact the bank or lender and negotiate if the property is not sold.
Set a maximum bid price in the auction, don't overpay for the property.
Buying a property without inspecting it In the auction, because of the marketing needs, the properties are all look valuable on paper.
However, it is not uncommon that the property might have damage or other foundation problems.
Don't buy a foreclosure property without having full professional inspections.
It might cost you a bundle if you have to pay for the repairs, especially when you are low in cash and have to take a loan to do the renovation.
You will later find out, after take the interest expense into account, the property you thought was a bargain at the beginning, is not cheap at all.
Close a deal without a home insurance Because you're not covered by the home insurance policy, once you own the foreclosure property, make sure you insure it as well.
A home insurance protects you from getting any lost if the pervious home owner causes any damage or removes any major component.
Overlook the redemption period In most states, the home owners have the right to retain the possession of the property and can redeem the title of the property by paying full loan amount plus accumulated interest and other expenses.
Redemption period varies from 3 months to 12 months.
You also need to have enough cash on hand to pay the property taxes on the property.
If you don't pay the property taxes, another investor may be able to purchase a tax lien and get control over the property.
They are also uncomfortable dealing with foreclosure homeowners.
Through the auction, they can buy a property in a less emotional atmosphere.
However, new investors often get burned by not having enough knowledge and experience in auction sales.
While the foreclosure auction looks easy, keep in mind, there are some common mistakes can cost you a bundle.
Not doing the title research Bidding properties at foreclosure auction is a very different process from a standard home purchase.
It is common that the property has several lines such as tax line, first mortgage and second mortgage.
You might lose money if you are not researching the tile before you make any bid.
Not setting a maximum bid price Auction fever is common for new investors.
New investors usually have enthusiasm to outbid fellow bidders.
In most cases, they end up paying more than the property is worth.
Keep in mind that you can always contact the bank or lender and negotiate if the property is not sold.
Set a maximum bid price in the auction, don't overpay for the property.
Buying a property without inspecting it In the auction, because of the marketing needs, the properties are all look valuable on paper.
However, it is not uncommon that the property might have damage or other foundation problems.
Don't buy a foreclosure property without having full professional inspections.
It might cost you a bundle if you have to pay for the repairs, especially when you are low in cash and have to take a loan to do the renovation.
You will later find out, after take the interest expense into account, the property you thought was a bargain at the beginning, is not cheap at all.
Close a deal without a home insurance Because you're not covered by the home insurance policy, once you own the foreclosure property, make sure you insure it as well.
A home insurance protects you from getting any lost if the pervious home owner causes any damage or removes any major component.
Overlook the redemption period In most states, the home owners have the right to retain the possession of the property and can redeem the title of the property by paying full loan amount plus accumulated interest and other expenses.
Redemption period varies from 3 months to 12 months.
You also need to have enough cash on hand to pay the property taxes on the property.
If you don't pay the property taxes, another investor may be able to purchase a tax lien and get control over the property.
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