Real Estate Law
Risks With Buying a House at a Foreclosure Auction
After a foreclosure, the house may become available for purchase through an auction. Most often foreclosure auctions are held at a courthouse and prospective buyers are not allowed into the house before making an offer. Additionally, the houses available at auction are generally only advertised for a week before the auction. As with any auction, you are bidding against other people, so the price of the house depends on who else is bidding.
Real estate and consumer protection laws vary by state. You should consider talking to an experienced real estate lawyer in your state to get legal advice for your situation.
Besides the bidding wars, there are a couple of other things to consider before bidding on a property at a foreclosure auction.
Prospective buyers are not allowed into the house before the auction, and the auction does not occur at the property itself, it is almost impossible to tell the condition of the house. You may be able to drive by the property or even walk around it before the auction to look in the windows but you cannot have a full inspection done. Looking in the windows might give you an idea of the condition of the house, but without an inspection, you do not know if the plumbing and electrical systems work, or the heating and cooling systems. Additionally, the house may have been gutted or trashed, or infested with termites.
Additionally, prospective buyers cannot be sure that the title of a foreclosed property is clear. It is recommended to have a title search performed prior to the auction to determine any outstanding liens. There may be a priority lien on the house that was not wiped away in the foreclosure. Such liens could be tax liens, child support liens, or even homeowners association liens. Worse yet, there could be a first mortgage on the house, and you only bid on the second mortgage at the auction. In many states, auctioneers are not obligated to disclose other liens during a foreclosure auction.
You may be able to buy properties under market value at foreclosure auctions but make sure to do your homework first, and be prepared to make repairs. Most foreclosure auctions require payment immediately after your bid is accepted. A buyer must have cash or a cashier’s check.
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified real estate lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local real estate attorney to discuss your specific legal situation.
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