Houses get auctioned off for various reasons. For example: Foreclosure or failure to pay taxes to the IRS or property tax.
Sometimes you can get an amazing deal on a property through auction. Why?
Houses typically sell for really low prices at auction for two main reasons: 1) Because you have to be able to pay cash (either your own or through a hard money loan) and there are only so many people who have access to the cash to buy a house outright, and 2) Because there is a lot of risk involved (more on this in a moment).
So, in other words, few people are both willing and able to buy the properties.
Be aware of the risks
Be very careful because it’s hard to know exactly what you’re getting. Typically you don’t get to go inside these properties or inspect them in advance. That means you’re not likely to have a very accurate picture of how much you’ll have to invest in the property to get it ready to sell or rent, so it’s best to overestimate repair costs. You never know what you may run into.
Sometimes people get angry when they’re losing their house and damage the house out of spite. They could pour concrete down the drains, knock holes in walls, or tear out wiring or copper pipes. There could be foundation problems or termite problems. In other words, things that could be VERY expensive to fix, not to mention a lot of hassle.
Because of the risks involved, this generally isn’t the best place for the average person to start investing.
That being said, properties you get from an auction can be a crazy good deal. Especially if you know how to do a lot of the repairs yourself. It may take a lot of work, but the returns can be amazing.
A few tips for getting a good deal
If you can, at least drive by any properties you know will be auctioned and see what you can see from the outside. Of course, if it’s possible to legally get access to the inside of the house (in other words, without trespassing) before the auction, that would be ideal. Often it’s not possible, though. Be familiar with the neighborhood the properties are in and know what the house should be worth if it was in good condition. Also know what the land is worth. In some cases you can may even be able to buy a property for close to what the land is worth. Then it’s hard to go too wrong, as long as the house at least has some potential and isn’t falling down.
There are different ways to buy houses from auction. Besides the traditional ways of finding houses that are being auctioned, there are also some websites where you can find properties. Here are a few: