On Friday, I had the exciting opportunity to go to a foreclosure auction on a property in Arlington, VA that my client was bidding on! We had written an offer on the property when it was on the market, but the bank foreclosed when he didn't accept it. I had no idea what to expect, so let me retell my experience for those of you who are curious!
1. Let's clarify what a "foreclosure" means:the terminology gets thrown around a lot, but a "foreclosure" is actually when the property is up for auction! If no individual buys it at the auction, technically the bank buys it! When the property comes back on the market through a Realtor (R) after the auction process, it's actually a bank-owned property, or Real Estate Owned (REO) - not a foreclosure as we commonly call it.
2. What to expect when you have nothing to expect! Be prepared for a very fast talking man in a suit representing the Trustee (in most cases an attorney's office). He'll read through the public statement, then tell you the opening bid on the property. He'll ask for bids...if you bid, be prepared to show him your deposit. Most ads will say "minimum X% or $X, whichever is the lowest of the 2." It'll be a cashier's check made payable to the trustee. He'll say "going once....going twice....sold for $xxx." Then you usually sign a one-page contract (which is advertised as your right to preview before the auction, but if you can ever get a live human being on the phone from one of these attorney's office...please share your secret!!)
3. I won?! Now What? Now, they give you a 15-day close period....and you're buying it subject to any other liens on the property. DO A TITLE SEARCH!! You want to know what you're getting yourself into! You need to know if the 1st, 2nd, etc. lien holder is foreclosing. This is CRUCIAL! It'll impact your top bid price tremendously, if you're buying the property subject to an additional $100,000 lien!
Also, another note...don't be intimated!! This particular auction had about 20 bystanders, and only 2 real bidders. The 3rd bidder bowed out after his opening bid! Go with confidence!
And..dress warmly!! They're held on the courthouse steps (usually) in RAIN OR SHINE!!!