Auction.com Foreclosure Closing Process

[Patrick Sikorski]

Hi all - I recently won an auction on a foreclosed home in my area. I have not purchased through auction.com previously or a foreclosure all together. What are some things I should look out for during the closing process, items to read through in the purchase contract and anything else to do in order to make sure the process goes as smooth as possible. Any insight would be greatly appreciated!! 

[John Slater]

HI Patrick - It kinda feels like "horse bolted now close the gate"

All the things to look out for should be done before walking in to auction being ready to buy.

Knowing your numbers - If I buy at X, property needs about X to rehab, other costs involved, so I can sell at X.  Title to pull you a pre-lim prior to buying so you can see if there are other liens on the property that you could be responsible for.  If you buying a first place lien, then there's only a small amount of things that can bite you in the ***.  If you buying a second place lien, or a 3rd place lien, then you are in for any and all senior liens, such as the first, which is usually the bigger of the liens.  

If you check pre-lim and know your numbers, the contract to purchase now needs to be looked at.  In california right now, because we are sooooo nice but then not, any auction sale is final in regards to the ex-owner.  Meaning they have ZERO right to redemption, however, a relatively recent law was passed that while the ex-owner has no right, any renter/tenant has first right to pay the exact amount that the property sold at auction, within 30 days of the auction sale, and they would become the new owner.  In that case you still don't lose, you get your money back as the auction buyer, but you also don't win either.  In our case, we can't get the deed until after 30 days, usually 45 days before we have it... then I could re-sell it.

So that now brings to the question of property research in the first place.  I go door-knock the property before auction to see who's there, to see if owner or tenant, to see if vacant, to see if I  can get an idea of the property condition, and to see if a tenant says "yep, going to foreclosure and I ain't moving till they evict me"... now you purchase price needs to incorporate the $$$ for eviction and time that will take, then decide if worth the headache.  

Everything is about analysis, from the condition of the property to the loan and liens on title, to the owner/tenant, purchase contract... and after all that, your decision to buy depending on your exit strategy to re-sell or keep as a rental.