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4 Ways to Dominate a Foreclosure Auction

While Open Door Auctions doesn”t specialize in foreclosure auctions, it has not escaped our notice that property investors are beating bushes and shaking trees to ferret out the best deals. With more than two decades of experience in the real estate industry, we”ve seen enough foreclosure deals close and collapse to be able to offer you four solid ways to give yourself the best chance to score that primo property at the next foreclosure auction you attend.

First of all, let”s take a look at the numbers. Buying properties at auction is hot right now, and judging by the continued rate of foreclosures hitting the market, it won”t be letting up any time soon. In case you have the mistaken idea foreclosures are waning, look at these numbers.

* lenders filed 3.8 million foreclosure notices in 2010
* that is 2% more than in 2009
* that is 23% more than in 2008
* 2011 is expected to be even worse, according to RealtyTrac

(click here to read the whole sordid mess behind the numbers)

So don”t let anyone tell you that foreclosures are on the decline, because they”re not. For the savvy investor, there is still money to made buying properties at foreclosure auctions. Here”s how.

1. Quantify – Before you even think about showing up and bidding at a foreclosure auction, do your homework. You have to be able to affix solid numbers to a variety of factors related to the property. Hold it up against comparable (comps) houses in the neighborhood in terms of value. Inspect the house thoroughly and know how much repairs are going to cost. Are there any weird things going on in the neighborhood that could affect your ability to rent the thing? Like a hog farm going in upwind across the street? Or maybe a race track around the block that revs the engines late at night on the weekends? To put it plainly, don”t even think about bidding on the place unless you have quantified anything that could eventually be adverse to your profits.

2. Start Small – For a rookie investor, it”s a good idea NOT to jump into a bid-calling, whistle-blowing, finger-signaling war with a bunch of veterans on the courthouse steps. Before you know it, they will have bid you up far past the level you wanted to go, then jumped out, leaving you holding the bag. Get your feet wet in the foreclosure auction arena by attending a small auction as an observer only. Perhaps the biggest mistake you could make at a public house sale is to casino start bidding at the first auction you attend. By all means, go, but keep your hands firmly in your pockets.

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3. Certified Check – One way to prove to everyone that you don”t have a clue about auctions is to show up without a certified check, usually for at least $5,000, depending upon the size of the properties being sold. You need to have this check to show the auction company you”re not just a tire kicker and have the legitimate intent to buy a property, if you”re bidding. Don”t forget to include the “buyer”s premium” in your calculations, which is a commission that often must be paid to the company conducting the sale.

4. Get the Best Deal – When it comes time to dive into the bidding, here are a few things you should know in order to walk away a winner. The first few properties often go for less because bidders are trying to get a feel of the sale”s pulse. This gives you a chance to jump in a scoop up a property or two while everyone else is getting limbered up. And don”t forget, during the homework phase, not to obsess on a single property. You”ll have plenty of time to scope out more than one and you should do your due diligence on several. Give yourself an edge during the actual bidding by not joining in on a flurry of bids. This only serves to help drive the price higher. Instead, wait until the chaos has died down to inject your offer.

If you”re at an auction and notice a group of well-dressed men clustered around the auctioneer, don”t assume they represent the lender and are there to outbid everyone. There”s a good chance they might actually turn out to be clever bidders who arrived early dressed for the part, seeking to intimidate others from bidding against their supposedly “deep pockets.” YOU should pull out your best business suit and try this tactic. It might help dampen the bidding enthusiasm for a piece of real estate you covet. Remember, all”s fair in love, war, and foreclosure auctions.

The Open Door Auctions Team

 

 

 

 


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