Making a Winning Bid: How to Bid at Foreclosure Auctions

Making the winning bid is an important step if you want to buy foreclosed homes at a public auction. Depending on the property and how much it is worth, you may end up being the solo bidder or in most cases, you may end up competing against other foreclosure investors like you. Here are a few tips to get you started on making that winning bid on a foreclosure or a sheriff sale.

Know where the auction is going to be. Do not assume that you know the exact place and make sure that the auction really is taking place (it can be canceled in some situations like the owner coming up with the defaulted amount).

Check out the property. Do not rely on inspection reports. If the owner has been evicted, ask to see the property yourself. If the owner is still living on the property, reconsider. This may mean you will have to deal with eviction later on.

Research. Public auction often means you may be liable for unpaid taxes, judgments or liens on the property. If this is your first time to buy foreclosed properties or you are your own sole investor, try to avoid properties that simply have too much on them.

Have the money or check with you. Ten to 20 percent of the overall expected amount is usually enough to secure property if you win. Cashier’s checks are normally preferred. Having the cash right on hand assures the seller you have the means to buy and pay the rest within the expected timeframe of property transfer. In some states, however, the full amount is required before you can even place a bid.

Know the opening amount. A savvy buyer knows that the initial amount is usually just enough to cover the defaulted amount and any fees incurred by the defaulting homeowner. The bank needs you to bid above that or they will simply take repossession of the property and unload it somewhere else.

Attend auctions you have no interest in. This is a great tip for first-time buyers. It gives you a chance to get a feel for what goes on and maybe talk or grab advice for old timers, either from observation or by asking directly.

Know how much the property is worth. Because it does not matter if you won the auction if you overpaid for the property!

Know your limits. Set your limits and budget for bidding and do not fall prey to a disease that often hits first time bidders: bidding fever. Some unscrupulous characters drive up prices by “false bidding.” This means they make bogus bids during auctions that they have no intention of paying — especially if they know you want to property.

Do not appear too eager. Appearing too anxious to get the property will simply drive its price up. Keep in mind that there may be veteran investors present who do not appreciate the fact that you — a first timer — are there.

Do not be late. Being late is frowned upon and the auction will never wait for you.

Bid what you can pay. You may think that the highest bid you can make will have a better chance of winning — which is true. It is when you have to pay up that it becomes a problem.