Editor’s note: This is a transcript of the audio file.
There are a lot of hassles involved in buying a foreclosure at auction. I’m Clark Palmer with your Bankrate.com personal finance minute.
First of all, you have to pay cash. If the house is worth $300,000, the opening bid could actually be $400,000 when all the loans, back interest, taxes and attorney’s fees are tacked on.
You can buy title insurance for these foreclosures but it won’t protect you from IRS liens. Also, any spousal or child support that wasn’t paid by the previous owner will go against the property.
Even if you straighten out those other issues, people could still be living on the property. They can file bankruptcy to stall the eviction process.
You can avoid a lot of these hassles if you buy a foreclosure from the bank. You can get title insurance and you won’t have to worry about liens or public debts on the property.
But you’ll still need to do an inspection, because the bank won’t tell you much about the house. A good inspection results in a report of about 20 to 30 pages.