What are the risks of buying a home at an auction.


#1

what do they do with the owner if they are still living in the house ,is buying home at auction offers you best price,thanks


#2

The major risks are:
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  1. No title insurance and sales are subject to existing liens and encumbrances. So, for example, if you buy a second you will still owe the first, and past due property taxes.
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    2.No inspections. Unless the house is vacant or the current owner will let you in (highly doubtful) there is no ability to inspect the property before you buy.
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  2. Eviction issues after you buy. Though I’ve never heard of someone who bought a property at auction losing an unlawful detainer case (eviction), they can occaisionally be a fight. Also since anyone can sue you for anything you may occaisionally find yourself in a lawsuit with the prior owner claiming the sale was no good. Again these things usually work themselves out, but it ties up your money for a while and you will incur legal expenses which may not be recovered.
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    I basically recommend buying at auction to those with the time and dedication to do it professionally, and the money to suffer some temporary losses. If you can buy ten houses a year and you make $50k on 9 and lose $50k on 1, you still made $400k. If you can only buy one and it happens to be the $50k loss it really hurts. Also note that you are more likely to make a mistake when you are getting started, so losses can be “front-loaded” - which really requires determination to work through.

#3

If I were to buy a home at auction, how could I tell the loan position of the party that’s doing the foreclosing? ? Thank you!


#4

You either have to research it yourself, or hire someone like a title company or abstractor to do it for you. We estimate loan postion as part of our service, but it should not be relied upon for a purchase at auction - it is only intended as a guide.