Who is the Seller? Properties sold at auction may be REOs or real estate-owned properties that lenders have acquired at sheriffâ€™s sales because there was no other bidder willing to pay more than the total amount due on the lenderâ€™s mortgage. The seller at auction might also be an investor trying to quickly resell properties purchased in bulk. Other auction properties are not foreclosures or distressed properties and even may be brand new. Sellers are attracted to auctions because they are quick, efficient, public and generally set a valid market price.
"As-is."Auction properties are almost always sold in "as-is, where-is" condition. This means that prospects looking at REO properties have to be extra cautious. The former owners of distressed properties were in financial trouble and likely not focused on home repair. Some angry homeowners may have damaged the home or ripped out appliances and property components.
Open house previews.Fortunately, most auction companies hold open houses before the auction. A prospect should inspect a property before bidding on it, ideally bringing a home inspector or rehab contractor along to find hard-to-spot damage and help estimate repair costs. A property at a lower price is no longer a bargain if the repair and renovation costs will be high.
Bidderâ€™s package.Often the prospect will receive a bidderâ€™s package while at an open house. The bidderâ€™s package normally includes the contract that will be used by the winning bidder to purchase the property. These contracts usually are "as-is" with no contingencies and no attorney review provision. The buyer will have approximately 30-45 days after acceptance to secure funding (if not already done) and close. Prospects can take the contract to their attorney for review before the auction. The bidderâ€™s package may also contain copies of a home inspection report, a survey and floor plans and a title report. A home warranty might be offered.
Some auctionÂ properties may have title issues, so a buyer should also have a title search report prepared if there is no report in the bidderâ€™s package or if it is not current. A bargain price evaporates quickly if the buyer must pour money into outstanding taxes, liens and encumbrances.
Neighborhood Comps.Find out the recent selling prices on neighboring homes. Real estate agents can provide these "comps," which show what comparable homes in the neighborhood are selling for.
Sheriffâ€™s sales mark the final stage of the foreclosure process. Sheriffâ€™s sales are open outcry sales with no sealed bids. The successful bidder, upon full payment and judicial confirmation, will receive a sheriffâ€™s deed. The rule of Caveat Emptor ("let the buyer beware") is in full force at sheriffâ€™s sales.
Notice published.Sheriffâ€™s sales are advertised in the newspaper once for each of the six weeks prior to the date of sale. Written notice describing the properties to be sold are also posted in three public places in the town or municipality (1) where the real estate is to be sold and (2) where the real estate is situated at least three weeks prior to the sale.
Peeking through the window.The sheriffâ€™s office does not know whether or not the properties for sale are occupied and cannot give permission for prospective bidders to enter and inspect the home. Some people drive to the house and look in windows when no one is around or talk with neighbors. This may help a buyer find out a bit more about the homeâ€™s interior but it also might result in trespass charges. A drive around the neighborhood, however, may be instructive because a home in a neighborhood where there are a large number of foreclosures may lose value as prices are probably still dropping.
Sheriffâ€™s deed comes with no guarantees.The sheriffâ€™s deed is a quitclaim and may not give clear title to the property â€“ each property is sold subject to any restrictions not removed in the foreclosure action. Consequently, a title search is recommended before a bid is made. If there is a legal question, an attorney should be consulted. Some sheriffâ€™s sale buyers have found themselves obligated for past-due taxes, IRS liens or construction liens, and some discovered they were responsible for evicting property occupants.
Ten percent down.The highest bidder at the sale shall be the buyer, who must pay 10% of the total bid in cash or with a certified check or money order immediately after the sale. Upon judicial confirmation of the sale, the highest bidder must pay the balance of the sale price. The court then pays the parties entitled to the sale proceeds and delivers the sheriffâ€™s deed transferring ownership to the highest bidder. If the buyer fails to pay the balance of the sale price within 10 days after the confirmation of sale, the deposit is forfeited and a resale is held. The purchaser must pay the recording fees and Real Estate Transfer Fees when the sheriffâ€™s deed is recorded.
Source: Wisconsin Real Estate MagazineÂ