Revenues from home auctions have risen 47 percent since 2003 across the country. But, before you decide whether or not you want to buy real estate at an auction, there are a few things you should know.
There are definitely some benefits to buying a foreclosed home at auction. Foreclosure attorney Tom Cook, with Lundberg and Associates, said, "Some people want to take a house that's entirely run down because they want to make it their own."
Plus, the buyer gets instant equity on the house. But Cook says these homes usually need a tremendous amount of work. "You can drive up and down most streets and see which houses are in foreclosure because they're the houses that are run down," he said.
If you decide to buy a fixer-upper from a foreclosure auction, do lots of research. Another company may have liens on the home, which you end up paying for. Cook says he's seen it happen with other buyers. "They tell us the horror stories of their last house, like how it was stuck in litigation for months and even years, or had serious defects in title that took them a lot of their own money to recover from," he said.
You can learn to spot these problems by learning the title search process yourself and then searching the property's records at the county recorder's office. Or, you could hire someone to do it for you. "The best method is to hire a title company to do a title report," Cook said.
But don't confuse a foreclosure auction for a bankruptcy auction. There are some differences. Statewide Liquidators and Auctions Partner Bill Shelton said, "Foreclosure usually goes through a bank, whereas bankruptcies go through the federal government." He added, "In a bankruptcy, the money goes to a trustee, who is an attorney, generally, who is appointed by the courts. And then he sees to the disbursement of the funds. And the liens against the house follow the funds, they don't follow the property."
Shelton says it's a good idea to talk with a loan officer before the auction, because you have to pay the full amount soon after the sale. "With our real estate auctions, we usually have a set date for closing, and we announce that up front," he said.
Lundberg and Associates holds auctions at the Matheson Courthouse on Monday, Wednesday and Friday at 12:30. Statewide Auctions advertises when it will hold its auctions in newspapers and on their Web site.
As for those great deals where people can buy a home at auction for less than half it's worth, some attorneys say that's not really happening in Utah right now. Sometimes at foreclosure auctions, the bank will charge what it is owed, even if it's more than what the house is worth.