Ocean City Today

Auction sales can be steals but takes care

Real Estate Report
By Lauren Bunting | Aug 31, 2017

(Sept. 1, 2017) Besides searching properties online and buying homes for sale through a realtor or for sale by owner, another option to find a home is through property auctions.

There are some different types of auctions, but one type of auction is the sale of a property “on the courthouse steps,” or a foreclosure auction. Foreclosure auctions offer a first chance to scoop up sought after properties, but there is extra risk involved.

In a foreclosure auction, the bank has completed the foreclosure process and is prepared to take the property back from the delinquent homeowner. Foreclosure auctions are held by bank-hired trustees. The starting price is usually the balance remaining on the mortgage, or could possibly be a lower number if needed to spur bidding. But, in case of a foreclosure auction, the bank is not allowed to make a profit, so in many cases the properties are sold at a loss. If no one shows up to bid on the property, the bank will “buy it back” and prepare to list the home for sale with a local agent.

But, if you are interested in purchasing the property directly at the foreclosure auction, there are some things to consider in making sure this form of purchase is right for you:

• Bidders must bring a cashier’s check for the earnest money (down payment) required by the auction holder (the earnest money seems to run about 10-15 percent of the estimated auction price but can vary)

• Winning bidders will pay any auction fees and/or bidding fees, as well as taxes and town/county water/sewer fees from the date of the sale on the courthouse steps (even if the foreclosure property is still pending judge ratification on the sale—and this can take up to two to three months)

• There could be other liens against the home such as tax liens, contractor liens or second mortgages. Researching title ahead of a foreclosure auction is a must.

• Winning bidder must then go through closing just like with any other purchase. Bidders at property auctions are often real estate investors who can afford to pay cash, but for auctions that allow financing, it is best to get prequalified ahead of time and not risk the substantial earnest money deposit.

• Foreclosure properties sometimes do not allow for home inspections or even offer previews of the inside prior to the auction.  Also, in some cases the former homeowner or a tenant can still be occupying the property and it is the winning bidders responsibility to evict.

Bottom line, familiarize yourself with the all of the auction terms before bidding to avoid any hidden fees. This way, you can have a total estimate of the purchase price to make sure you are getting a good value in exchange for the added risk of buying at foreclosure auction.

– Lauren Bunting is a licensed Associate Broker with

Bunting Realty, Inc. in Berlin.

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