Foreclosure Glossary
How much to bid at foreclosure auction.?
Partner and I are really new to this, but we have been along to watch a couple of auctions after doing some self education online.
How did some of the bidders calculate what the property in question was worth to them? They obviously had maximum amounts they would not go beyond. How was the reserve set? And what is an upset price?- we couldn’t find that definition in the glossaries we looked at.
Maggie, the “upset price” is the reserve price set at auction by the lender or the auctioneer.
There are a couple of issues with setting a maximum price. A disadvantage of a foreclosure auction is the inability to inspect the property, and maybe there are tenants to evict; both these factors drive your costs up.
Here’s a formula I have used when buying for a resale later.
Determine FMV using comps, appraisals and local expert brokers’ opinions. Start with the price you then think you can resell the property for in fair condition.
Subtract any liens or judgments you identify in title search. You may try to settle these at a discount.
Subtract any repairs you identify from an outside view of the property, from local knowledge of the occupants, and build in a cushion for unknowns.
Subtract the costs you will incur as long as you have to hold the property before resale. Insurance, taxes, loan payments etc.
Subtract the closing costs you will incur when you resell the property, including agents commisions if you will use their help.
Now you have arrived at the Gross Profit to you, lets say Total A
Subtract the default or final judgement amount.
Now you have the net profit from the whole deal.
Subtract the minimum profit you want to make from the whole deal from Total A
That’s your maximum bid.
The minimum bid is the default amount.
Because of the doubt over repairs, if max=min, forget it.
I am a contributor to the Foreclosuredatabank Discussion Board and the above example formula has been quoted there.
Mortgaged And Armed and Predator Nation
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Glossary: Notice of Default & Foreclosure Survival Handbook for Homeowners $5.69 “Glossary” is the second companion book to author Mike Rockwood’s critically acclaimed, “Notice of Default & Foreclosure Survival Handbook.” “Glossary” is an indispensable guide to learning and mastering the language of lenders! Other books in the series: “The South Bay Notice of Default Handbook” and “Workbook” guide you through the steps to make sound decisions, wise choices. Written by an e… |
