Ever wonder how people make money in real estate? The secret to the market may lie largely in foreclosure auctions,which occur all over the country on a regular basis. Much like investing in the stock market, you need to buy low and sell high to make the real estate business work for you. Buying from a foreclosure auction is a way to get the low buy in rate, but you have to use caution and know what you are doing.

Looking into Your Market

You must get familiar with the market you are buying in, so using nationwide foreclosure auction resources and buying property in markets across the country can be very risky. You don’t want to invest in property in Florida for example, if it is sitting in the middle of an area wiped out by a hurricane. It is better to know which area you wish to purchase property in and wait for foreclosure auctions to come up in that given area.

Bidding Etiquette

It is sometimes possible to contact the property’s current owner before the home comes up at the foreclosure auction, and try to strike a deal beforehand. Usually, there is around a month before the auction during which time the homeowner may sell the home to avoid the foreclosure. It’s often much easier for banks or the government to deal with sales of foreclosed property than an auction.

It doesn’t matter in the long run if you can’t buy from the homeowner because you just move on to bid at the auction. Some auctions allow you to call in a bid while others require you to physically show up, but it is your job to find out which realtor is doing the auction and find out these details.

Realize from the start that the current homeowner is not going to tell you everything you need to know about the property in question. Foreclosure auctions are bound to different laws in every state, so it is your responsibility to find out what those laws are in the state you will be bidding.

What Should I Bid?

A general guideline is to bid around twenty percent less than the market value for the property. You can find the estimated market value by reading the complete valuation report or property reports. You need to at least inspect the property with your own eyes, or even better hire an inspector, because there could be major flaws with some properties. You don’t want to turn a foreclosure auction bargain into a loss of money if there are serious flaws with the property which will cost a lot to fix.

Remember that you need to have the money ready to go for whatever amount you bid, because you typically won’t have much time to get it paid for. How much you can put up right away should be your guiding factor in how much you bid.