If you're among the many looking to buy foreclosures at auction, don't have any fear the decline in filings over the past several months will rob you of your chance at a fabulous buy.Home foreclosure filings declined steadily from August through November 2009, but were still significantly higher than they were a year ago, according to RealtyTrac, a leading online marketplace for foreclosure properties.
Home foreclosure filings For November 2009 -- including default notices, scheduled foreclosure auctions and bank repossessions -- numbered 306,627, a decrease of nearly 8 percent from the previous month, but still up 18 percent from November 2008. That number means one in every 417 U.S. housing units received a foreclosure filing in November.
Default notices nationwide were down 8 percent from the previous month, but still up 22 percent from November 2008; scheduled foreclosure auctions were down 12 percent from the previous month, but still up 32 percent from November 2008; and bank repossessions were flat from the previous month and down 2 percent from November 2008.
Many of these homes will be sold at auction.
Rob Friedman, chairman of Irvine, Calif.-based Real Estate Disposition Corp., or REDC, which now presides over nearly 500 auctions a year, says potential buyers can definitely get a "steal of a deal" at an auction, but also warns novices to be wary.
"Getting a steal at auction boils down to preparation," says Friedman. The biggest auction mistake, Friedman says, is lack of homework. "You have to set out to quantify risk, inspect the property well, and then quantify the necessary repairs and run price comparisons, or 'comps,' in the neighborhood so you'll know the values."
Many buyers have never attended a real estate auction before -- either a large auction like REDC operates, or those smaller, trickier "trustee auctions" routinely conducted on courthouse steps around the country. Both can be intimidating for novices and fraught with unseen peril, particularly the latter.
In the larger sessions, which typically feature dozens of foreclosed homes in a sizable geographic region, novice attendees may feel lost in a sea of bid-calling, whistle-blowing and exotic finger signals.
Experts suggest interested parties test the waters by attending a smaller auction as an observer.
Depending on the size of property, bidders at these auctions will usually need to bring a certified check for $5,000, made payable to their own name, to show the auction firm they have legitimate intent, Friedman says. The successful bidder then signs the check over to the auction company. Losing bidders simply redeposit the check in their accounts.
Larger auctions usually have two or three of the largest mortgage lenders in attendance, though buyers "are certainly allowed to go to their own lenders," Friedman says.
Then there's the matter of the "buyer's premium." REDC and similar firms such as Williams & Williams usually charge a 5 percent fee for their services. Friedman suggests that would-be buyers add that sum into the calculations of the amount they are prepared to pay at auction. Unlike trustee auctions, homes at these events nearly always have free-and-clear liens and up-to-date property taxes and fees.