Is there a certain time of the year when most foreclosure auctions take place? When is the best foreclosure auction time of the year? This article discusses some of the major timing factors.
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To answer this question we need to dive in and understand the timeline for the foreclosure process as well as understand market forces driving foreclosure rates.
Foreclosure auctions are not planned by the home owner, but the time of auction may be aimed at by the lender for tax reasons and the ability to sell at a good price. However, anytime may be a good time to go to an auction as an investor.
Economic Factors Driving Foreclosures
National foreclosure rates have improved from their peak during the Great Recession, when many home owners could no longer afford the mortgages on their homes. Certain states, however, continue to have high foreclosure rates due to economic conditions tied to those areas. For example, The states with the highest recent foreclosure rates are clustered mostly in the Northeast and also Alaska due to dropping oil prices.
Generally, foreclosures will rise when the national or global economy goes through a downturn. However, other factors are often more relevant.
For example, an aging population with high medical bills can lead to high foreclosures. Low income or blue collar areas dependent on a few key employers can suddenly see foreclosure rates spike if these companies face trouble. As a result, foreclosure rates are not necessarily tied to the state of the national economy or real estate market cycles.
The Time it Takes for Foreclosed Homes to Go to Auction
The pre-foreclosure period can last anywhere from three to 10 months, after which a public auction or trustee sale will take place.
When a homebuyer takes out a loan to purchase a property, he signs a contract with the lending institution to repay the loan in monthly installments. The home owner is said to be in default if they fail to make payments for at least three months. After this period, the pre-foreclosure period begins but the owner must be atleat three months delinquent on mortgage payments.
During the pre-foreclosure period, the property owner can pay off the outstanding debt and reverse the default status. Or, they can sell the property before it goes into foreclosure at market price or using a short sale. Once in foreclosure, the lender can take the property to auction or list it as an REO.
Real Estate Market Cycles
The real estate market goes through cycles and an investor can learn how to profit from this. Housing market trends are subject to various pressures, including the rise and fall of mortgage rates, ease of access to credit and new laws and government initiatives that impact homeownership. Along with this, general economic booms and downturns affect the real estate market. The best time to invest in real estate is usually opposite to the best time to sell property.
Seasonal and Climate Factors
Foreclosure Auctions in the Winter
Its possibly best to invest in real estate in the winter as close to the new year as possible. The local real estate market may be affected by changes in the weather and seasonal activities. Spring and summer are great times to show buyers the area and homes as the weather is warmer.
Because home buyers look mostly in the spring and summer, foreclosure auctions may be less attended in the winter months. This is due to new investors, similar to new buyers, not seeing the benefits of the area’s real estate market until the warmer summer weather arrives.
Experienced investors, however, will know that buying a property in winter at auction, fixing it up and flipping it in the spring and summer is optimal, and will be attending these winter auctions. Competing buyers tend to put their house hunting activities on hold during the holidays, creating an opportunity for motivated real estate investors. It can be a good tactic to attend auctions during winter holiday season to flip the house in the summer.
Foreclosure Auctions in the Spring
The second best time during the year to purchase investment property is at the start of spring. The market will start to pick up as the weather improves with supply rising along with demand. There could be more properties to choose from, and home inspections will be easier to accomplish.
Fair weather will also make it easier to pinpoint problematic structural and cosmetic issues for rehab. This also a great time to flip a house because families will start looking for new school districts and address changes.
The seasonal increase in demand when warm weather arrives means home owners falling behind in their mortgage can sell more easily.
Lenders may be seek to have their properties go to auction before the calendar year ends to generate tax advantages. Investors may also have some advantages if they spend funds before the end of the year or even at the start of the new year, depending on how their year is defined.
So going to foreclosure auctions right before or after the new year could be a great opportunity for investors.
These are some of the major factors going into the best foreclosure auction time of the year.