A foreclosure that is being sold at an auction is a trustee sale. When a homeowner fails to make his or her mortgage payment for over 60 days or has failed to pay property taxes the property is placed in a trustee sale. What are some of the advantages and disadvantages of buying a foreclosure at an auction?
- These homes are often sold at a discount, giving the opportunity for a great bargain!
- As soon as the property is sold, the title of the property is changed.
- Because the title of the property is changed right away, the previous homeowner is not always given much time to move out of their old home. This can lead to the previous homeowner needing to be evicted or the home being left in a disastrous state.
- May need a pre-approved loan that is often only approved for a certain period of time.
- Need cash or a cashier check for the trustee to know that you, the buyer, have the necessary financial means to purchase the home.
- Generally the home cannot be inspected until after being purchased. Because of the reasoning behind the home being foreclosed (i.e. neglect in payments), many of these homes will need maintenance and renovations.
As with any home purchase, homework needs to be done. Find the list of homes that are going to be sold at the auction in order to determine what the minimal bid is and whether or not you can go evaluate the home prior to buying it. With the homework complete, you will be more prepared to buy a home at an auction. The two advantages mentioned can most definitely make buying a foreclosure at an auction completely worth all of the disadvantages.