On Tuesday (July 7, 2009), I went to my first foreclosure auction. Admittedly my knowledge of real estate is rather weak due to the fact that real estate has not interested me as much as the stock market. However, for one of my classes I will have to write a paper about the foreclosure auction process. Not knowing anything about the process, it was recommended that I should go to the courthouse on the first Tuesday of the month when our state has its auction. So I took some time off of a work and went to visit the courthouse.

As I was driving past the courthouse, I wasn’t sure if was in the right area but then I saw just a ton of people outside on the courthouse steps. I always assumed that foreclosures weren’t really handled on the court house steps. I thought it was just an expression now more than actual reality. However, I was wrong, that’s actually how we do foreclosure.  In this day and age with technology and the internet, we still sell properties right on the courthouse steps. Anyways, as I walked up to the courthouse, it is organized chaos.  There are two main “zones”. Zone 1 is where the state was selling properties due to lack of payment on property taxes. Zone 2 is where bank representatives were selling properties that were owned by the bank. This second zone was very confusing and looked like a mosh-pit you would see on the floor of the stock exchange. There was so much yelling and utter chaos I couldn’t imagine business was actually being done.

Zone 1 as I call it, seemed to be much more logical and orderly. The county sheriff would call out each properties information (lot number, stress address and court case) and then start the bidding at the minimum bid. If someone accepted the bid and there were no other offers, the only bidder was allowed to purchase the property. If someone took the minimum bid and there was more than one person interested in the property, a bidding war took place until one final buyer had emerged victorious. I saw one property start with a minimum bid of $2,000 and end at $18,000. I must say this was, by far, the most exciting part of the auction. About 50% of the time, I was shocked to see, the Sheriff would ask if there was any bids for a property and declared a “no bid”.

My biggest problem with the foreclosure process is the lack of information. I did not know how to find information on the properties. A few people informed me I could buy their book of information on the properties for about $50 a month.  I finally spoke to someone that gave me the website to look for property but since it wasn’t a government website, I thought not to post it. I do not know how accurate the information on this site is. I thought should be available on the county’s or county clerk’s website.  Also the time and date of when the foreclosures actually take place was surprisingly difficult to find. I actually went to the state’s website and found the rule that it’s every first Tuesday of the month. The location however, I couldn’t find it so I just guessed.  Also the bidding process, I know that payment is demanded as soon as the winning bid is entered but I have no clue on how to set that up. All in all this process is still complicated and new to me, and I can’t figure out why people just couldn’t login to the county’s website, create a login, add an actual bank account information to verify funds and then allow for bidding to occur online. I would bet the state would make more money and more people would participate.

While I still don’t fully understand the process, I am intrigued by the possibility of making money through foreclosures. I spoke to one individual that told me he purchased a $100,000 condo for about $10,000. Now I could not verify any of this but if it is true, what a great deal! Now there are some pitfalls besides the actual process, including other liens on the property and state of the property. The sale of the property does mean you own the property but you still have to deal with other lien holders. So if, for example, you buy a property of $20,000 and it worth $100,000 but there is a second lien for $80,000, you didn’t get a deal. It is really important to do all the research before purchasing a property. I have no clue how to do this yet but hopefully I can learn. Another problem is actually doing a real survey of the state of the property.  As of right now, I have not figured out a way to get a list of properties and then how to have a thorough investigation of the property before buying. I couldn’t imagine going to the property, knocking on the residences door and saying, “hey I want to buy your house in foreclosure, let me take a look around”. That’s of course assuming anyone is actually there.

Overall this was an interesting experience but I still have many questions that are left unanswered. One thing is for sure, a deal maybe had if you understand all the rules of the game and pitfalls. This statement is probably true of any type of business, now that I think about it. So if I do decide to buy a foreclosure, I really have to gain some knowledge and understanding of the foreclosure process but buying a house for pennies on the dollar could be motivation enough for me.

photo: respres