Buying Bank Foreclosures Homes Versus Buying at Auctions
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Buying bank foreclosures homes and buying homes at public auctions are both viable options for investors and owner occupant buyers, but the safer way for the vast majority is buying bank foreclosures homes.
Public auctions are structured in such a way that only buyers who have been dabbling in real estate auctions for a long time get the really good bargains. If a novice bidder gets a real bargain, he is either among the luckiest persons in the world or he has invested money and much time in learning the auction process.
During a public auction, the bidding moves fast and in a frenzied manner that an unexperienced participant can get swayed by the energy building in the room and make a final bid much higher than the market value of the property. On the outside, some properties look fabulous, but they hide defects that can only be corrected with expensive repairs. The interiors of these properties cannot be inspected before the auction; they can only be looked at from the outside.
Also, these homes can have title defects, such as tax liens, mechanic’s liens, or worse, second mortgage claims worth several thousand dollars.
Online public auctions are even riskier, as one can only get an idea about the properties from the photos and the meager information provided. Recently, the media was flooded with complaints from people who spent thousands of dollars in bidding for assets through a newly-launched online foreclosure auction, but later discovered that the assets they bought were just tax liens and not properties.
In contrast, buying bank foreclosures homes is practically free of pressure and risk. One can be assured that any bank owned home being sold is already free of any encumbrances, including unpaid taxes, HOA fees and inspection fees. One has also time to make a complete inspection of the property before closing, and the time to work with a real estate professional to arrive at the best purchase offer.
More importantly, bank foreclosures homes can be bought with FHA loans or any affordable loan options available in the mortgage market.
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