If you are looking to invest in real estate, there are many places to find opportunities. There are distressed properties, properties in pre-foreclosure, off-market sales, and short sales, to name a few. These situations provide opportunities for hopeful homebuyers.
However, there is another opportunity to purchase property, and that is at a foreclosure auction. In this article, we will explore what a foreclosure auction is and how it can be a great place to start your career as a real estate investor.
But first, let us review what circumstances need to occur for a foreclosure auction to take place.
How Does A Property End Up At A Foreclosure Auction?
In Massachusetts, there are several steps a bank must take before a property is ready to enter a foreclosure auction. When a homeowner signs a mortgage contract with the bank, the owner agrees to make all payments on time, or they will be in default. The bank can begin the foreclosure process after enough time has passed with the property owner defaulting on the mortgage.
In Massachusetts, the bank does not have to go to court to foreclose on a home. This right that banks can employ is called the “power of sale.” When a bank uses the power of sale to foreclose on a home and put it into an auction, it must follow the proper procedure to notify the property owner.
The following are the terms of communication that the bank must follow to legally place a property into a foreclosure auction, via the power of sale:
Right to Cure Notice – This is the notice that informs the property owner the number of days they have to catch up on the overdue mortgage payments. If these payment dates are made the bank will not foreclose on the home.
Right to Modify Notice – If the property owner’s income has been affected, sometimes the bank will have to notify the property owner of the modified payment options they are entitled to make.
Acceleration Notice – Consider this notice the final notice for property owners. This notice lets the property owner know that the full amount of the loan is due, and if the debt is unpaid, the home will go into foreclosure.
Servicemembers Civil Relief Act Complaint – The banks must supply this notice to any property owner they foreclose on. If the property owner is an active military service member, they can reply to this to halt the foreclosure process.
Affidavits – The bank must record two affidavits with the registry of deeds. This is to verify that they have taken the proper steps to notify the property owner that their property is entering foreclosure.
Publish the Foreclosure Auction Date – The bank must publish the date of the foreclosure auction for three consecutive weeks in the local newspaper.
Foreclosure Notice – The property owner needs to receive notice from the bank declaring the date of the foreclosure auction.
Are You Confused About The Different Types Of Off-Market Home Sales? Read Our Blog To Learn More! Off-Market Home Sales
Why Purchase Property At A Foreclosure Auction?
The most attractive incentive for purchasing at a foreclosure auction is the possibility of a discount. Properties put up at a foreclosure auction may be distressed and need renovation. They could be real fixer uppers/ The lender (the bank) is eager to relieve themselves of the property debt as soon as possible. So there’s a good chance the property will sell below market value at auction.
What To Consider Before Purchasing Property At A Foreclosure Auction
Consult your local government websites and newspapers to find foreclosure auctions. Be aware of the considerations before you make an impulsive buying decision.
In many ways, buying a property at a foreclosure auction is equivalent to purchasing sight unseen. Most banks and trustees that are in charge of hosting the foreclose auction do no allow for the home to be inspected on the inside. Typically, you do have the opportunity to have a home inspector or contractor investigate the property at a foreclosure auction.
You’ll need to be confident you can afford to renovate the property or flip the real estate for a profit before you purchase. Alternatively, only attend auctions that allow you to inspect the property before bidding.
Understand the auction rules, legal obligations, and financial requirements. The property featured at foreclose auction will have different contigeneces than an on-market purchase. The bank is going to look to process cash and have it as soon as possible.
We Are Here To Provide Guidance
Are you looking to sell your distressed property quickly for cash? Or are you interested in real estate opportunities at foreclosure auctions? There are lots of opportunities out there. Let’s discuss how to find them. Growing Edge Properties is happy to advise on your unique situation.
Please reach out to us so we can help you find the best solution for your property needs!