This past Sunday there were 36 foreclosures advertised in the Hartford Courant. A few months ago there would only be one page of foreclosures advertised. Now we’re up to 3-4 pages of foreclosures every Sunday. This week, one of them was on my block in the West End.
The sign went up on the lawn 2 weeks ago. After it was listed in the Courant, I had 3 people call me to ask how they could go about purchasing the house. Here was my quick and dirty response… First, you should call the attorney managing the sale. They will give you specifics on how much debt is outstanding on the property (that they actually know about). The bank has also done an appraisal and you’ll need to bring a bank check to the auction in order to participate. The check is for 10% of the appraised value, or about $45,000 in the case of the subject house. There is no mortgage contingency allowed, so you need to have your money lined up if you were to actually win the auction, otherwise you can lose your deposit if for some reason you couldn’t secure a mortgage (the $45,000). Essentially, you have to be a cash buyer. There is no guarantee that you will actually be able to get into the house on the day of the auction in order to perform an inspection, so you may be buying the house blind. Who knows what the condition will be on the inside?
The takeaways from my mini-lesson: you need to have cash readily available in order to participate, you’d better be handy or have a contractor in your back pocket because the property may be a mess on the inside, and you need to have a market analysis done before the auction to understand what you’re willing to pay and the actual value of the property (the bank’s appraisal isn’t always accurate).
Everyone is fascinated with foreclosures now and think they’re a great way to make a quick buck. My advice, leave them to the savvy investors or contractors. But if it’s something you want to try and get into, here’s an excellent article from the New York Times that talks about someone that does short sales as their business. I personally hope my neighbor can save his house before it goes to auction.