The "inspector" tells you about things that will need to be corrected. You will also note things that you want to change. Have your contractor or the person supplying quotes to include all these in the quotation.
Now that you know how much is needed to bring the property up to your standards, you need to research any liens that may come attached to the property, and add these, too. When figuring your total cost with the work and liens into the purchase amount, remember that you will have a maximum price for all of this or a market sale price less your margin to account for. Working backward from this maximum, you'll know how much you want to bid, at the most.
Different auctions have different rules. A trustee auction requires you to pay your bid amount immediately. No side trips to the bank are allowed. You must bring cashier's checks totalling your maximum bid and tender them if you win. Tax liens plus any higher mortgage liens have to be accounted for. For example, if the HOA is foreclosing or a second mortgage is foreclosing, remember that the first mortgage and tax liens remain intact and have to paid before they foreclose, too.
A sheriff's auction does transfer title, but it is a revocable title, because the owner has the right of redemption. Up to 6 months later the owner may come to you and pay off the amount you paid plus interest, as called out in your deed paperwork. Also, real property taxes or Federal tax liens may not have been fully satisfied in the auction. Be aware and be prepared to take care of these, too.
When a bank forecloses and cannot sell the property using traditional Realtor listings, they may engage an auctioneer to sell the property. Rules for these vary widely. Typically you must bring 10% in cash (cashier's checks like for the trustee) and show that you can get a mortgage on the balance within 30 days. You have to read the rules that apply for that auction. There are several big auction companies that conduct periodic auctions like this. We get their announcements regularly.
Are any of these auctions what you're asking about? If not, one other possibility occurs rarely. An owner will conduct an auction similar to the auctioneer scenario but where the process is done remotely. My best advice is to shy away from these, because they are often run amateurishly and you don't know what process is being followed. Auctioneers have a fiduciary duty to conduct auctions properly -- these auctions run remotely may or may not be conducted fairly.
So, what about are auctions a good deal? Maybe. Knowing upfront what repairs and improvements are needed takes time and effort, and some tradespeople won't do the visits, inspections and quoting without a commitment from you to use them. You might lose part of what you gained in exorbitant pricing -- so make sure you trust the people you use.
Occasionally, a bidder will show up who is just hell-bent on buying a property you like. He will bid the price up out of the reasonable or profitable range into high altitudes that make no financial sense. Be prepared to walk away from any deal when you have reached your maximum. On the other hand, remember that later you might feel cheated if the property went for $500 more than your maximum and NOW you realize you would have paid that and then some. So, set your maximum wisely so that you don't kick yourself later.
A Realtor can help you prepare, and even bid, but they won't do that for nothing. If the auction house (who runs the auction) offers Realtors a commission, that should be enough, but you may have to negotiate with the Realtor. If no commission is offered by the auctioneering company, you'll have to find a way to compensate your helpers.
Not all auctions are the same. Some are open, some closed bids. In the case of HUDs, it's a closed bid. They typically are on the market for 7-10 days, at which time the highest acceptable Net bid is notified that they have won. Signed documents then need to be delivered within 48 hours. Upon notification of acceptance and contract execution, you then have an additional 48 hours to deliver the earnest money. Typical closing is 45 days from the date of contract execution. Financing can be cash, conventional, or FHA. New listings are generally posted on Sundays with a bid deadline of the following Sunday at midnight. If you have an interest in learning more, I would be delighted to help you. Let me know more specifically what you're looking for, Regards,
Dan Harkrider - Coldwell Banker - Flower Mound - 214-505-5452
Not enogh room in here to explain to you the entire process. However, are you looking at the Sheriff's auction? If so, that one is for cash buyers only or you would need to find a lender that i willing to close on the transaction on the day of the auction.
You must do lots of research on auction homes because you will inherit whatever liens are on the property, back taxes etc. and usually the price is worth it. Many times the properties are occupied so you can't even do an inspection so you have to purchase sight unseen.
There are however auction companies that sell homes and those the deal is different. You are only required to put a certain amount down and can finance the rest and close a few weeks late.