Real Estate Investing Through Foreclosures: Buying a Home at Auction

As a real estate investor, purchasing a foreclosure home at auction can offer a great deal of equity for a small amount of money. Finding these properties is not always easy, but the actual auction is fairly straight forward.

So what should you do to prepare for an auction? First, you need to find homes up for auction. Purchasing an auction home is not like working with a home owner to prevent foreclosure - an auction is the lender actually selling the home to try to gain its mortgage money back.

After foreclosure proceedings are done and the auction date is set, the mediator will post legal notice of the pending auction. You can find auctions by checking the legals section of the newspaper classifieds. The notices will list the plaintiff (the lender) and the defendant (the home owner), along with the property address. Most notices will also list the minimum bid.

Once you have found some properties, you need to drive by and look at them. Take notice of the neighborhood and how well kept the other homes are. Ideally, the foreclosure home will be below average on upkeep, so that you can fix up the property and force equity buildup. Don't be discouraged if the outside of the foreclosure property shows some distress - this is very common with these types of homes, as the owners are unable to afford upkeep, and sometimes do actual damage to the home out of frustration.

Keep in mind that you will likely be unable to view the inside of the property unless the mediator allows walk throughs. Contact the mediator to see if you can schedule one. The best scenario would be for you to be able to get inside and bring an inspector with you. If not, take good notes about the outside condition, and peek inside windows if the property is vacant (don't do this with occupied houses).