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What Are the Risks and Benefits of Buying a Home at Auction?

Posted on in DuPage County Real Estate Attorney

IL real estate lawyerWhen an individual falls behind on his or her mortgage payments, the lender may foreclose on the home and the home may be sold at auction. If you are interested in buying a home, you may be interested in participating in one of these foreclosure auctions. The process of buying a home at an auction is much more complicated than it may seem. It is important for anyone considering this option to fully evaluate the possible risks and benefits associated with buying a home at auction.

You May Not Be Able to See the Home Before You Buy It

One of the biggest risks associated with buying a house at auction is that potential buyers often have little information to go off of. The auction notice may offer some property information. However, there is no way to know exactly what type of condition the property is in. Potential buyers cannot have the home inspected. In most cases, they are not even allowed to walk through the home to evaluate the interior of the house. Many enthusiastic buyers have been shocked to realize that a home they thought was a great deal actually needs tens of thousands of dollars of cleaning and repairs. Because you cannot see the condition of the home, it is very difficult to accurately estimate the value of the home and offer a reasonable bid.

The Property May Contain Liens or Encumbrances

Another major risk associated with buying a foreclosure is that the property may have liens or encumbrances on it. If the home was foreclosed because of unpaid property taxes, the foreclosure may eliminate any liens on the property. If a home is foreclosed because of a delinquent mortgage, superior property liens may survive the foreclosure. Banks may pursue the home’s new owners for a lien settlement. Consequently, it is essential for potential buyers to perform a title search to learn about any liens and obligations the buyers will be responsible for. If you are thinking of buying a foreclosed home, working with a skilled real estate attorney is the best way to ensure that you do not end up responsible for liens and encumbrances you did not know about.

You May Be Able to Buy a Home For Much Less than Market Value

In foreclosure auctions, the lender cannot profit from the sale of the home. If there is a profit after the mortgage and liens are paid, it goes to the original property owners. Consequently, many foreclosed homes are sold at a loss. It is sometimes possible to buy a home for as much as 50 percent less than the list price. However, buying a home at auction is not something you ever want to do without extensive research into the process. Failure to conduct proper due diligence and truly evaluate the advantages and disadvantages of this option can leave you regretting you ever started the process in the first place.

Contact a Wheaton Residential Real Estate Lawyer

If you are thinking about buying a home at a foreclosure auction, proceed with caution. While buying a home at auction can sometimes reap financial rewards, it is extremely risky. For dependable legal guidance for residential real estate transactions, contact a DuPage County real estate attorney at Stock, Carlson & Duff, LLC. Call 630-665-2500 for a confidential consultation.

Source:

https://www.investopedia.com/articles/mortgages-real-estate/10/should-you-buy-at-an-auction.asp

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