How do people actually turn a profit in the real estate business? Many investors who turn a profit from real estate are buying property from foreclosure auctions. Think of the real estate business like you would the stock market, where you need to get a low buying price and sell for much higher to get ahead. Participating in a foreclosure auction is a great way to buy low.

Know Your Market

Although you could subscribe to online services that let you know when foreclosure auctions are going to happen anywhere in the country, you are asking for trouble buying property in a market you know nothing about. You don’t want to invest in property in Florida for example, if it is sitting in the middle of an area wiped out by a hurricane. It is best to stick with foreclosure auctions that are in specific locations that you are familiar with.

How to Bid

It is sometimes possible to contact the property’s current owner before the home comes up at the foreclosure auction, and try to strike a deal beforehand. In most states, the homeowner will have around a month to find a buyer before the auction. The mortgage lender will usually prefer a direct sale to an auction anyway.

It doesn’t matter in the long run if you can’t buy from the homeowner because you just move on to bid at the auction. Some auctions allow you to call in a bid while others require you to physically show up, but it is your job to find out which realtor is doing the auction and find out these details.

The current homeowner is not going to open up and tell you all the details about the property. Before bidding at a foreclosure auction make sure to look into the laws for the state in which you will be bidding.

Deciding How Much to Bid

Usually, a good bid is twenty percent less than the estimated market value of the home or property being foreclosed upon. You can find the estimated market value by reading the complete valuation report or property reports. However, it is urged that you not only inspect the property yourself, but hire your own home inspector to give it a once-over. Although you can get bargains at a foreclosure auction, it’s not a bargain if you bought a home just about ready to fall apart.

Remember that you need to have the money ready to go for whatever amount you bid, because you typically won’t have much time to get it paid for. Keep that in mind when determining your bid.

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