I get calls pretty consistently from people wanting to buy foreclosures. They assume (often rightly so) that they can get these properties for pennies on the dollar.
Foreclosed properties in King county are auctioned off each Friday in one of two locations, beginning at 10 a.m. They are in front of the King County Administration Building, 500 Fourth Ave, and next to the south entrance of Northwest Trustee Services, 3535 Factoria Blvd. S.E. in Bellevue. (NW Trustee Services has the largest database of pre-foreclosure homes available on their site at www.northwesttrusteeservices.com)
Here are some facts about buying a foreclosure that most people aren't aware of.
1. You almost always only get to view the property's exterior.
2. You must pay for the home in cash once you've won the auction. CASH!
3. Home owners have an eight month right of redemption in this state. This means that should the person who lost the home at auction be able to come up with the amount of money of the winning bid at auction, plus interest, then they can again enjoy ownership of the property.
This doesn't happen often, but it does mean that the new owner or the person who placed the winning bid must worry for eight months about whether or not the home is really theirs. If it were me, I would certainly refrain from putting anymore money into the house. I would also consider not moving into the house until the 8 months following the sale have expired.
I always tell people their better bets are to attempt to get 'distressed' properties when they are in a 'short sale' situation (before foreclosure and when the bank will have to take less than what is owed on the property) or REO (real estate owned - when the bank was unable to sell the property at auction and it has been re-listed). In both of these scenarios (when listed - and they almost always are) you have the ability to see the interior of the home and further to have it inspected, you don't need to buy 'all cash' and all of your other due diligence may be completed (title review, etc).
I can supply you with lists of both short sale and REO properties should you like to see them.
Homes sold at auction are also sold as is and on the spot and the owner generally gets access to the property within three weeks.
Lastly you don't necessarily know which liens are held against the property when you buy one at auction and the order is important as follows - a typical lien order may be. . .
First position: The mortgage.
Second position: An IRS lien.
Third position: Unpaid child support.
Fourth position: A home equity line of credit.
Fifth position: A lien placed to collect money awarded in a legal dispute.
If ,say, the home equity line of credit company decides to foreclose, all of the liens above it will be paid once the home is foreclosed and sold, but the liens below it will not. While it may seem like a property is a steal at only the cost of the home equity line of credit, the purchaser may also very well be stuck with the first mortgage and IRS lien so it's incredibly important to do your research (to the extent that you are able to determine these types of things - a title company is your best bet but they do not provide title insurance on foreclosed properties bought at auction, so buyer beware!)
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