A Guide For Buying Properties At Government Auctions
There are many government agencies selling foreclosed homes to the public. Government foreclosures on properties can be for one or more of a variety of reasons. Generally speaking the most prevalent reasons for foreclosure are the inability to make mortgage payments and the non payment of Federal, state and local taxes or all three of these. However the government is also able to foreclose on a property for non payment of assessments, homeowners’ association fees, utility bills, and believe it or not mechanics liens.
The major government agencies who have thousands of foreclosed homes on their inventory, include HUD, VA, IRS, FDIC, and CBP, but there are also many others. These homes are dead weight just sitting in their inventories and have to be liquidated into cash flow. Government agencies such as the IRS, US Customs seize the property of people who have violated the law in some way or other. The way these properties are sold is through government auctions.
If you are new to this market never buy at your first government auction, first gain a little experience of the auction process before you buy. Attending auctions is a really good way to learn about the systems and processes before you dive in the deep end. Once you do decide to buy a property on sale at government auctions, don’t buy unless you are able to make at least 10% profit when you have deducted all relevant expenses. Set a budget limit for yourself, do not get auction fever, stick to your limit!
If you are buying a property from a government auction that you want to live in yourself, it is a simple matter buy one requiring extensive repairs. You obtain the property cheaply and it can be gradually fixed or redesigned while simultaneously living in it, this allows for tremendous savings. Remember to immediately change the locks and obtain insurance as soon as you receive the title.
When buying a property on Government auction to re-sell, bear in mind the market is not really a seller market at present. But if you think you can do it at a good profit, then don’t buy a property that requires more than just cosmetic repair. If fixing the leaking faucets and a good lick of paint will do it, then that is what you need to invest in. If anything more serious is required, you might find that you have landed a money pit.
Buying multi family units are a great way of investing in properties for leasing purposes. But you will have to ensure that you have enough money available to work with a handy man or maintenance contractor to have the property ready for renting.
Bear in mind that tax liens have a redemption cycle of 120 days. You have to obtain title insurance to protect your interest in case the IRS decides to exercise its option. Many title insurance companies want you to wait out that 120 days before they will issue insurance.