How Much Should I Pay?

To establish the amount of your maximum bid, take the market value of the property and subtract the cost estimate that the contractor gave you. If you did not hire a contractor, subtract any other costs you have incurred in the process of examining this property. Buyers may base their market value estimate on similar foreclosures found through our service or as established by an independent appraiser.

Look at that number. This includes any lawyer consultation fees, title search fees or anything else you have spent money on in checking out this home. That is the amount of your maximum bid. If you were to spend any amount more than this on buying the home at auction, you will be losing money. You will have spent more on buying it than it is worth.

Never pay above your maximum bid at foreclosure auction. The amount you spend on the home should ideally be well below the amount of your maximum bid. In most cases, it will be. But the amount it costs to get a property up to market shape could outweigh the potential savings you stand to reap. This is why extra steps like getting a title search performed and hiring a contractor could be important.

For example, if you figure on saving 35 percent off market value at auction but have to spend 30 percent of the market value just to repair the property, you are only looking at 5 percent in savings. At that point it is time to consider whether there are better deals out there. Our members can easily find multiple quality foreclosures to choose in their area.

You are not looking to buy just any property; you are looking for the best deal you can get. This is why it is important to maximize your time early in the foreclosure search. Rule out bad properties before you spend time investigating them. Only go after the ones you really think have the potential to be good values.

Whether you're purchasing a family home or investing in a property to turn around and sell, it is important that you do your homework to avoid overpaying. But remember that you can't take too long; someone else may snatch up the property. However, it may be better to pass on a home if you aren't fully confident in it.

There is no worse decision you can make than to go ahead and buy a property you know is not a great value because you have invested a lot of time in it. Don't spend more money than you should because you feel it would be a waste of time if you didn't. It just goes to show how important it is to put a lot of time into researching a property.

Remember, it is not required that you hire anyone to assess the property or get a title search performed. You may not even have time to depending on the circumstances. But if you can, an appraiser, contractor and/or title search may reveal issues with the property that you missed. Don't forget that buyers can also use our service to compare the property with other foreclosures in the area.