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Auction Homes

What are auction homes?

A lender or government agency will foreclose on a property if a homeowner is unable to make his or her mortgage payments on time. The foreclosed property usually goes to auction, conducted by a licensed Auction house and is sold to the highest bidder to try and recoup as much money as possible for the lender that provided the loan. Often, the goal for these lenders is to just break even and get their money back. This is where the opportunity arises for you to get a deal when buying foreclosed homes sold at auction. Investors and/or buyers can purchase the property for lower than market value since the banks mostly will be content to just break even on the deal. These auctions are sometimes called sheriff sales or foreclosure auctions. The sheriff sales are traditionally held on the steps of a courthouse, and conducted by the sheriff or his deputies, giving the auction its name. At the sheriff sale, buyers and/or investors may bid on the property alongside the lender, the highest bid wins. All sale proceeds from the auction property go to pay back the lenders, banks, tax collectors, and other claimants. Some of the popular auction houses are Auction.com, Hubzu, ServiceLink Auction and Williams & Williams.

Are Auction homes a good investment?

Buying a property at a foreclosure auction can be a great opportunity whether you want to occupy the home yourself or for use as a rental property. Firstly, the property is often priced well below market value, which means that buyers can purchase a property for a significantly lower price than they would otherwise pay, resulting in a higher equity potential after the purchase. Secondly, foreclosure auctions can offer buyers an opportunity to purchase a property that may be difficult to acquire through traditional means, such as through the local MLS and a real estate agent.

Investing in auction homes depends on various factors, including the current property condition, local market conditions, going with the right financing, and your long-term investment goals. Research and professional advice can always help in making good investment decisions.

Can auction homes be financed or are they cash only?

When bidding for an auction home, the financing options range from cash, conventional, FHA, VA and HUD mortgages or some investors may use Hard Money Lenders. Typically, auction houses require prequalification when registering, which also establishes the auction's terms. At auctions, cash buyers can have a competitive advantage over other buyers who need to obtain financing.