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What you should know when going to a foreclosure sale.

Some of you are long experienced investors in foreclosure properties and know all the ins and outs of the sale, but for the uninitiated, I thought I would make a shot summary of what you need to know when you go to the sale.  If you have been through this before, no need to read on, but if you are new, this will help you to not look like a newbie and hopefully prevent you from making an embarrassing error.  

 

Always arrive at the sale 10-15 minutes prior to the sale.  There are a two main reasons for this.

1. Some sales get very packed and you do not want to sit on the floor for 1-3 hours.  

 

2. Many of the lenders' lawyers (Especially the big ones) will go through all of their properties and disclose what they will bid the property up to at the sale.  They do this to save time for everyone at the sale.  There is no reason to bid on the property if the bank's minimum bid is more than you are willing to take.  Nothing screams "Newbie" like bidding up to $2,500 on 10 properties in a row that the bank has already said they will not let go for less than $100K.  

 

Before the judge comes in make sure to turn your phone off or at least set it to silent.  The judge will confiscate a phone quickly if it interrupts his court.

 

When the judge enters, make sure to stand up.  It is common court practice to do so.

 

The first thing the judge will do is go through the properties that will be struck from the list.  This will be somewhere between 10% and 30% of the properties in a sale.  These properties could be removed for a number of reasons, including:

1. Borrower paid it off

2. Borrower did something to delay the sale of the property to a later month

3. Someone bought the property before the sale

4. Bank/Lender withdrew for any reason

 

Once the judge has removed all of these from the foreclosure sale, he will start the auction of the remaining properties.  This happens very quickly from here, so you must be ready to bid and know your top amount.

 

There are two primary types of property that remain in the sale

1. Regular Auction: These are just as you would think they are.  They are open for bid and go to the highest bidder at the sale.  These typically start at $500 or $2,500 and bidding happens quickly.

 

2. Not Final Sale Properties:  When these properties come up, the Judge will say, "This is not a final sale" and then will ask the bank what they bid.  The bank will state their bid number (for example $250,000).  There is a separate sale 30 days later (NOT THE NEXT FORECLOSURE SALE)  in which you can bid $1 more than the bank's bid and purchase the property (pending no other bidders).  This is called a deficiency sale.  Basically, it means that the bank is going after the borrower for the difference, so it has to give the borrower 30 days to try and get a higher amount for the property.  The judge will tell you the date, time, and location of the Deficiency Sale at the beginning of the foreclosure sale.  

 

Back to the bidding:

 

If you are interested in bidding on a property, you need to know the following:

1. The Judge requires 5% down at the sale and the balance paid to the court within 30 days.  When you pay the balance, you will also pay carry interest for the number of days from the date of the sale to the date you pay the remaining balance. 

 

2. The 5% may be paid in cash or cashiers check.  NO PERSONAL CHECKS.  For some frequent buyers, they allow them to bring corporate checks, but if you are still reading this, you should bring cash or cashiers check.  

 

You might ask, "How do I know how much to bring?".  There are two answers to this:

 

1. If you already are going to pay cash for the balance, you can bring a check for way more than the required 5%. NOTE: They will not pay you back the difference, they will only apply it to the price, so be prepared to leave that money with them at the sale

 

2. Some buyers bring multiple cashiers checks made out to themselves or to cash (usually $1,000 each).  If you do that, you can sign over as many as you need to.  

 

Other than that, it can be fun to sit back and watch the show.  It is fast and furious and it is always fun to see a hot property at the sale that has 4 or 5 bidders chasing it.  Just be careful not to get caught up in the moment.

 

Finally, just because the the property was not purchased at the sale does not mean that you cannot get it.  About 90% of the properties that actually make it to the auction are returned to the bank.  You can call them the next day and make an offer.  Many good deals are gotten this way.  My next post will explain this process.  

 

As always, our reports are the best way to be organized and prepared for the sale.  There is no better way to sort through the many properties and find the one that you are looking for than using our reports.  Feel free to contact us if you have any questions.