Are you preparing to enter the world of buying foreclosures? Have you seen various “gurus” promote their get-rich-quick programs that involve attending a foreclosure auction and how you can be an instant winner? Buying foreclosures at an auction is certainly a staple in the real estate investment worldforeclosure auctions but here are a few items to consider before making your first bid.

When a lender forecloses on a property, they will put the property up for auction at the next county sale. The list of foreclosures that will be sold at the next auction are a matter of public record. In some areas these properties are listed online while some are only available by visiting the county recorder’s office.

A bank will have a minimum they will accept for the property. Contrary to what some believe, buying a $150,000 home for $5,000 won’t happen if there is a mortgage lien for say $100,000. If the bank doesn’t get its minimum bid, the home goes into the lenders’ Real Estate Owned, or REO department. The home will then later be listed with a real estate broker or sold directly by the banks’ real estate agent.

If you are the successful bidder, depending upon where the property is located, there’s no time to arrange for financing with your bank. At auctions, you’re required to pay up with certified funds or by wire within one business day after the auction.

Most properties going to an auction can’t be properly inspected. The current owner may still be living there and hiring an inspector as well as a contractor for a series of walk-throughs isn’t going to happen. At the same time, there may be additional liens that cannot be released, even if the property is foreclosed upon. You can view the outside but rarely will a full blown inspection be allowed.

There’s much more to an auction that can be read here. There are entire books written on buying and selling foreclosures and it takes several professionals to properly evaluate a prospective purchase. If the home has been foreclosed upon and the bank has repaired the property and prepared it for market, sure, you can inspect all you want. But at an auction, the more you know, the better.