Search for foreclosure listings in your area, which are typically advertised in public auctions. While a short sale is advertised and sold by the homeowner through conventional means, a foreclosure property is owned by the lender where the homeownerâ€™s loan originated. Most states require lenders to turn over bank-owned properties for public auction by the state, so finding foreclosures is much more difficult than finding homes available for short sale. States that operate public auctions are typically required to advertise every auction in the local newspaper, so this would be a good place to start. Lists of available foreclosure properties in your area may also available through commercial means.
Compile a list of four or five properties that catch your interest. Try to choose properties in the same price range, especially if you plan to secure financing. As with short sales, there could be substantial competition for these foreclosure properties, so it is advisable to have backup options in case your bid loses.
Secure financing before you place bids on property. While a short sale may afford you up to a month to secure a mortgage after the seller accepts your offer, public auctions usually require the winning bidder to pay the full purchase price within 24 hours. Unfortunately, this means you wonâ€™t know exactly how much financing you will need until after you win the auction. Explain the situation to your lender, and request financing up to a certain amount within your budget. You do not need to use the full amount if you later realize you do not need it. Have your lender mail you a certified check, which you will need on hand when you bid.
Attend the auctions for the properties on your list. Bring along your check from the lender and your driverâ€™s license. Arrive at least an hour early if you wish to tour the inside of the property before bidding. You will probably not have the opportunity to tour the property alone, as you usually would with a short sale.
Start bidding when the auction begins. Public auctions are performed â€œoutcryâ€ style--that is, each bidder shouts the amount he wishes to bid on the property. Continue bidding until either you win the auction, or the price reaches too high. You can stop at any time, provided you are not the highest bidder, and walk away if the sale price exceeds your limit. Repeat this process until you get the property you want.
Fill in the purchase price on the certified check and sign the bottom. You may need to contact your lender to activate the check before you turn it over, so bring a mobile phone with you to the auction. Give the check to the auctioneer when the auction concludes, and be sure to get a receipt showing you paid in full.
Wait up to two or three months for â€œclosing.â€ While a short sale has a conventional closing process, a foreclosure sale typically does not. When the bank that owns the property is ready to make the final transfer, it will send you the final documents to sign. Once you return them, you can prepare to take possession of your home within a week.
source : http://homeguides.sfgate.com/buy-foreclosure-vs-short-sale-8993.html