So, are you thinking of purchasing property at a foreclosure sale? Perhaps you think that you can make a lot of money buying a house in foreclosure, and then flipping it. Certainly some people do very well doing just that. HOWEVER if it looks too good to be true, then it likely is.
Before you bid in a foreclosure sale, there are several things to consider.
First, understand how foreclosure sales in North Carolina work. The foreclosure sale is going to be set for a specific time between 10 am and 4 pm on a day the courthouse is open. While the sale should start at the time listed on the notice of sale, it could happen up to an hour after the listed time. In addition, while there will be a person yelling auctioneer style at the courthouse on the day and time of the sale, most of the bidding takes place after that. Once the sale is held, then there is a ten-day period for bidders to submit upset bids. You can simply go to the courthouse and complete an upset bid form the next business day after which a foreclosure sale is held and place your upset bid. You do not need to be present during the initial foreclosure sale. However, you will need to deposit five percent or seven hundred fifty dollars (whichever is more) of the amount of your bid with the clerk of court , and every new upset bid needs to be at least five percent or seven hundred and fifty dollars more than the prior bid. Finally, every new upset bid starts a new ten day upset bidding period, so the upset bidding period can sometimes take months.
Second, property being sold at a foreclosure sale is usually being sold “as is – where is”. In other words, there are no guarantees as to the condition, or that you will be receiving clear title. The mortgage being foreclosed could be a second mortgage on the property. If you win the at foreclosure sale of the second mortgage, then the first mortgage likely still has the right to foreclose. In addition, there may be other liens or judgments more senior to the mortgage being foreclosed. If you win at the foreclosure sale, then you take the property subject to these senior judgments and liens. To avoid these problems have an attorney examine the title of the property and advise you on these issues.
Finally, look at the property before you bid on it. The property is being sold in whatever condition it is presently in. Even if the property appears to be an incredible deal on paper (such as only one, small mortgage and no other liens), there is probably a reason for that. For example, the property could have suffered significant physical damage, such as a fire, having then been abandoned and exposed to weather for an extended time. Such a property is going to require significant repairs to be resold or rented. In addition, there are minimum standards regarding structural soundness of houses and other properties. If you purchase a property that is in violation of these standards, then the city or county housing standards commission (or whatever other appropriate authority) could require you to make repairs and potentially condemn the building if you do nothing. So, make sure that you know what you are getting into.
If you need an attorney to advise you regarding bidding at a foreclosure sale, do not hesitate to contact one of our foreclosure attorneys at Black, Slaughter & Black.