Q: What happens when a home gets foreclosed?
When a home gets foreclosed, the lender on the home sends the home to a trustee auction at which case the home is auctioned off on the courthouse steps. In King County that could be in downtown Seattle or in downtown Bellevue. And the home is sold to the highest bidder. Sometimes the home is not sold at which point it goes back to the lender. The lender then sells the property on the real estate market.
Q: How do I buy a home at a trustee auction?
Buying a home at a trustee auction takes a lot of faith. It takes a lot of time. I would advise working with a company that will allow you to see which homes are going to be auctioned off every week and give you as much information as possible on those homes. You will have to pay a commission but there is a lot of work involved when buying a home at auction. First of all you cannot see the home, you can look at the exterior, drive by it, you might be able to walk around it if it’s empty but you won’t be able to get inside the home to take a look. And also many of the homes that are supposed to be auctioned never are auctioned off that day. There’s a last minute change, the auction is delayed for a month or two months or it’s called off all together. It takes a lot of work and you’re lacking a lot of information. So do as much as you can to find as much information as possible before you go to the auction.
Q: Can I finance a property being sold at a trustee auction?
At the trustee auction you have to pay cash for the home. Now, you can use short-term money to buy a home at a trustee auction, however that money is quite expensive – probably 3x the rate of a mortgage. What you may do is buy a home at auction using the short-term loan and then refinance it at some point as soon as possible after you take possession of the home.