Many new home buyers in the Brentwood area consider a foreclosed home auction to “get a deal”. Buyers can get good deals at the when working with foreclosed home auction companies such as Hudson & Marshall.  Another good place to look for a foreclosed home auction company is Williams & Williams. But before a buyer decides to purchase a foreclosed home, they need to clearly understand the process, risks and costs before considering purchasing a Brentwood foreclosed home through an auction.

First, in Brentwood all foreclosed home purchase at auction are purchased “as is” with very limited rights of inspection and few disclosures. Inspections and investigations must be done prior to the Brentwood foreclosed home auction. Auction companies typically hold open houses for foreclosed home to allow potential bidders in Brentwood access to view properties and bring in consultants and/or inspectors to conduct their investigations.

Second, the price shown on foreclosed home brochures is often a “starting price” and not the price that will be accepted. Most Brentwood foreclosed home auctions have preset undisclosed “reserve” prices set by the seller. In the event that the winning bid on the foreclosed home is below the reserve the sale will not be concluded. The Brentwood seller may ask the buyer to raise his bid to meet the reserve or decide to put the foreclosed home back in the auction or list it with an REO agent. In short, you can do all the research on the foreclosed home, attend the auction, have the winning bid and still not get the Brentwood property.

Third, be prepared to leave a non-refundable deposit for the foreclosed home and pay a “buyer premium”. The buyer premium is an amount charge above the winning bid price ranging from 3% to 5% of the winning bid amount. This amount charge for the foreclosed home cannot be financed or included as part of the down payment used in the financing of the foreclosed home. Often, the earnest money deposit requirement is equal to the buyer premium. First time buyers, using FHA financing with 3.5% down payments, now have more than double the cash requirements to close.

There are many other issues to consider before buying your Brentwood home at a foreclosure auction. I’ve highlighted just some of the key points and strongly recommend extreme caution and diligence in considering the purchase of a home at auction.