The real estate business is said to be a great source of income, but how do you actually go about bringing in a profit without taking on huge risks? Foreclosure auctions are often where many people find the deals that bring in their big profits. You have to get a low buy in and sell for much more in this market, so it is much like investing in the stock market. A foreclosure auction is a great way to get the low price on a home, as long as you make the right moves.

Learn the Market

Although you could subscribe to online services that let you know when foreclosure auctions are going to happen anywhere in the country, you are asking for trouble buying property in a market you know nothing about. You don’t want to invest in property in Florida for example, if it is sitting in the middle of an area wiped out by a hurricane. It is best to stick with foreclosure auctions that are in specific locations that you are familiar with.

Bidding Etiquette

It is perfectly okay to contact the owner of the property to try and make a deal so the property doesn’t go on the foreclosure auction block. In most states, the homeowner will have around a month to find a buyer before the auction. Direct sells during this period are often gladly accepted by the mortgage lenders who don’t benefit much from the auction process.

You can still bid at the auction if you can’t get a deal with the homeowner beforehand. It is up to you to find out what realtor is handling the auction and if you can phone in a bid or if you have to attend in person.

Do not expect the current homeowner to open up with the details of the property. Foreclosure auctions are bound to different laws in every state, so it is your responsibility to find out what those laws are in the state you will be bidding.

Deciding How Much to Bid

In general, you might consider finding the estimated market value of the property and bidding around 20% less. You will have to find the property reports to determine what that estimated value is. There still could be serious flaws in the home despite this market value, so you need to at least look it over yourself if not hire an expert to inspect it as well. Although you can get bargains at a foreclosure auction, it’s not a bargain if you bought a home just about ready to fall apart.

Depending on the foreclosure laws in the state where the auction is taking place, you may have to pay for the property in full. How much you can put up right away should be your guiding factor in how much you bid.

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