3 Ways to Buy A Foreclosure

2. Auction

Another way of purchasing foreclosures is to buy them at auction on the courthouse steps. Plenty of investors do this, often because it’s a way to buy an attractive property with multiple liens.

But for most people, this option is fraught with risks, experts say. For one thing, you don’t get to see the interior of the house before you buy, you don’t get to conduct your own inspection, and often you have to evict the former owner.

“There could be horrendous things wrong with it,” Clarke says. “You better know what you’re doing or know that the price is so good, that even if it’s a disaster inside it will still be worth it.”

You also have to be ready with a check that day for the full amount you plan to bid.

Moreover, you must do your own title search — there are no title insurance policies here — or else liens on the property could prevent you from getting clear title when you are trying to sell.

And many states offer a right of redemption for the previous owner — a time period in which he can get his property back if he pays the lender the outstanding loan amount, plus interest and the lender’s costs in foreclosure.

You’d hate to buy a property at auction, pour money into it to fix it up and then have the owner reclaim the property and these improvements. It’s rare, but investors typically try to head this off in right-of-redemption states by purchasing the “redemption rights” from the previous owner for a few hundred or a few thousand bucks before or after the auction.

It’s worth noting that online auctions are emerging in the foreclosure space. If you investigate this option, be careful that the auction house you’re dealing with is selling the property and not a lien on the property, experts caution.

It’s best for: seasoned investors only. There is too much risk involved for people who don’t make their living in real estate. And frankly, investors say, often the minimum bid is no great bargain.

By Melinda Fulmer of MSN Real Estate

Melinda's point of view is correct about the auction and one not taken lightly. Especially if you are a First Time Home Buyer