The foreclosure process is a long, complicated, and expensive process that involves a number of different organisations, groups and individuals. There are many ways that investors can be involved in the foreclosure process and a number of investment strategies and sub strategies. For the purposes of this article we will only touch on one element of foreclosure investment strategies – the foreclosure auctions themselves.
Depending on the state where they take place, foreclosure auctions occur at different intervals and follow varied procedures specific to each state. But they will all essentially follow a process that somewhat resembles the following: every month on the city courthouse steps, properties that have been foreclosed upon will go up for auction to the highest bidder. The investors will not have the opportunity to view the inside of the properties up for auction, but they will be given a list beforehand and they may view the exterior of the property. The starting bid for these properties begins at whatever amount is owed on the property to the bank, plus interest, and any other fees outstanding. Once the auction begins, investors compete with increasing bids until one comes out a winner. They then place an immediate deposit and transfer the rest of the funds within 24 hours. Once funds clear, the investor owns the property free and clear (excluding any past due property taxes).
Not being able to see the property beforehand makes foreclosure auctions a high-risk high-reward endeavour. Only the well-educated investors who do their homework and have an appetite for calculated risk survive in this game.