A foreclosure auction occurs when the owner of a mortgaged property defaults on the loan and the property is sold to the highest bidder. The amount of the sale is disbursed to the lender. Here is a step by step description of how a foreclosure auction of a home takes place.
Find a property and Prepare for auction:
Any person with interest in buying a home at a foreclosure auction must be up-to-date on the information and act on it as quickly as possible. Once you find a property, you must collect as much information as you can about it. You must also determine whether there are any liens or judgments against the property. These can include unpaid personal property taxes, civil lawsuit judgments and state or federal tax liens.
Financial arrangements have to be made to bid at the auction. In some states, the entire amount must be given at once. In others, only a percentage of the amount must be given at the auction and the rest must be paid in a set amount of days.
It is a good idea to have some experience with such auctions prior to making your first official bid. You will feel much comfortable while bidding and you will have an idea of how the auction is going to proceed and you can decide accordingly.
Confirm Details of auction:
There is always the possibility of the owner stopping the auction by paying off the amount owed to the lender. A scheduled auction can also be postponed or cancelled. Although cancellations and postponements are announced at the time and location of the originally scheduled auction, you can call the trustee to find out beforehand. Since the bidding procedure is different in every state, you should familiarize yourself with your state laws on cancellations and postponements.
Prepare for Potential bargain
Before your first bid you need to have information about the market value of the property, liens against the property, and the amount left in the mortgage to be paid off to the lender. Usually the opening bid amount will be the total amount to be paid off to the lender along with the expenses to meet the foreclosure auction. If no one bids over that amount the possession of the property will be taken over by the foreclosing lender. It is very important to know all of the liens against the property and their priority before you bid, because if you are the highest bidder then you are responsible to pay off them.
Decide on the bid amount
After taking into consideration the above factors as well as your financial capability, you have to decide on the amount you can will bid on the auction. In states where the full amount must be disbursed at once, your bid will not be considered if you do not have the required amount ready with you. Even in states where you do not have to give the full amount at once, you might get caught up in the heady auction atmosphere and overbid – leaving you stuck in a bad deal. Also, if you are not able to pay the full amount before the prescribed date, the deposited amount will not be refundable. Other factors to consider when deciding on a bid amount are the rate of real estate appreciation in the area and the potential for increasing the property’s value by making repairs and improvements.
Bid at the auction
Recheck with the trustee to find out whether there have been any changes to the schedule of the auction. Arrive at the location early and get a good idea of the environment. The auctioneer will collect the name and amount possessed from each bidder. No one is allowed to bid above the amount they possess. Prior to the opening bid, the trustee will read aloud the legal description and terms of sale for each property.
Take Ownership
If you are the winning bidder, you will collect the necessary documents and enquire about further formalities involved in the sale. You should have a clear plan for when the transfer of ownership will be completed. Be sure to maintain a proper and regular follow-up. In the redemption period, the owner of the property can pay you back the full amount paid at the auction and retain the property. Therefore, it is wise not to do any reformation work on the property until you have redeemed the ownership of the property.
There is no doubt that foreclosure auctions can present some of the most attractive real estate buying opportunities available. This is due to the fact that the opening bid is based primarily on the mortgage balance and not on the market value.
The construction industry took a beating due to the financial crisis. Just how bad did home building decline? It depends where you look but overall, the numbers are very frightening.
In a report released recently, new order for homes built in the third quarter of 2008 was down 25% compared to last year. In numbers, that is 2,002 homes for this year compared to 2,660 homes in 2007.
Because of what is happening in the economy, there was increase in the number of cancellations from 24% last year to 27% this year. While real estate companies tried to curb the trend by offering it to other potential buyers, the market wasn’t biting which is why there were a lot of homes that were never sold.
In terms of home building revenues, that roughly translates to $928 million. If you think that is still good, look back at the sales performance last year and you will see that it was lower by 27%. These figures go on and on and they are really depressing.
So are companies making money? No and the worse part is that construction companies have to layoff hundreds or even thousands of workers in order to stay afloat.
If you wanted to build a home, the only way you can do that is if you have extra money flowing around right now because most banks will not able to loan that amount to you right now.
At this rate, the construction industry will only be able to produce 817,000 new homes this year compared to 1.98 million units in 2006. That is a lot and it is note expected to improve any time soon.
But are these numbers surprising? The answer is also no because it is the right reaction especially when the country is in a financial crisis.
Analysts believe this will change in the next 2 to 3 years because within this time frame, homes that were unoccupied will now have people living in them and only then will home building be once again on the upward trend.
What everyone is hoping for right now is a miracle because we are not yet out of the woods when we talk about the current financial crisis. Yes, a $700 billion bailout plan was approved and signed into law but just like Bernanke said, no one expects the recession to end overnight. It is going to take time.
Is the home building decline also happening elsewhere? In the case of Canada, the answer is no. In fact, the opposite is happening. If you were to compare the number of houses built for the month ending September this year versus last year, 6,000 more homes were built in 2008 compared to 2007.
There are many reasons for this such like more people want to settle down so they move away from the rest of their family and most importantly the program they have in place happens to be much better across the border compared to what is available in the US.
But back to reality, no one can deny that over here, there is a sharp decline in home building. The only thing anyone can do is hope for the best in the months and years ahead so we can maybe forget that this ever happened.
