It is common knowledge that foreclosed properties offer real bargains and auctions are a good place to find a gem of a bargain. However, buying foreclosed properties at auctions requires careful thought and correct preparation. It would be a big mistake to assume that it is just a matter of having the financial capacity, knowing where the auctions are to be held and parting with your money for a piece of real estate. Rather, it takes a lot of patience, a bit of learning and some research.

To be successful in buying foreclosed properties at auctions, the following 3 steps have guided many real estate investors to land a great deal:

1. Learn Before Bidding

• It is best to know how the process at foreclosed property auctions works. Attending a couple of auctions, talking with the people there, soaking up information available and making good use of all the full range of learning opportunities at the auctions would be invaluable.
  
• Listen, look, observe, register and record the process. How do the bidders and auctioneers operate? What do they do? How do they do it? What are the lessons to be learnt from their behaviours and actions?
  
• Make a comparison of the winning bid and the reserve price. What was the actual selling price versus the minimum bidding price? Record it for reference.

2. Research The Property

• Read and understand the information provided in the property auction notices. Details such as the type of property, location, reserve price etc., are to be noted. Is the information made available sufficient or do you need to dig further? Are you familiar with the location of the foreclosed property and the neighbourhood? What else do you need to find out?
  
• Visit the site. How does it look? Observe the key features of the property and its surroundings. Is it currently occupied? Are the occupants the owners? How is the foreclosure of the property being accepted by the owners? Some discreet and tactful questions may provide the required information. Talking to the occupants would be a good approach failing which friendly neighbours may prove to be helpful. Would you be able to amicably deal with the occupants after purchasing the property?
  
• What sort of repairs and renovations would be required? What would be the estimate costs? If the property is not occupied, when was it last occupied? Is it in a good state of maintenance or has it fallen into a state of disrepair? It would be advisable, where required, to follow-up with a second visit perhaps this time with a building and construction professional.

3. Prepare Your Bid

• How much are you prepared to offer for the foreclosed property? At what price would you stop bidding? Factor in the cost of repairs and renovation, legal fees, service and maintenance charges, rental and sales commissions and other incidental costs.
  
• Obtain a bank draft for the initial payment required. You may need to have some extra cash and a cheque book would be useful. Estimate the initial payment as a percentage of the reserve or minimum price of the bid. This would be stated in the notice of sale. However, be prepared to pay more as the final or winning price could be higher. You can pay the difference with a cheque

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