Shopping for a home can lead first-time homebuyers in many directions — to real estate agents, by-owner listings and, lately, to foreclosure notices.
The government doesn’t always come to mind as a source for potential real estate deals, but a number of national, state and local agencies are in the business of reselling homes, whether through standard listings or auctions.
Homes wind up in government auctions through two main routes: property seizure or surplus property, said Ian Aronovich, president of GovernmentAuctions.org, which aggregates information on auction listings and locations. Of the two, residential properties are more often found at seizure auctions, which involve the sale of real estate seized because of tax evasion and other criminal activity, he said.
State and local jurisdictions will also take properties seized by the court for unpaid taxes or through mortgage foreclosures and sell them at courthouse or foreclosure auctions often led by a government official at the county courthouse or at the property’s address. Buyers usually don’t get to see the property in advance, need to pay for the property quickly and may become responsible for liens and unpaid taxes.
But governments can take over homes for other reasons, too. In D.C., the Department of Housing and Community Development earlier this year auctioned more than 30 homes, some of which had been abandoned and none of which went through foreclosure. The goal, said Angelita Colon-Francia, spokeswoman for the department, is “to get these vacant properties out there to help stabilize the neighborhoods in which they exist and also to reintroduce some properties into the housing market in the District of Columbia.”
Bidders had to arrange for financing before the auction and did not have the chance to inspect the properties beforehand, although winners were able to do a walk-through, she said.
The Department of Housing and Urban Development sells what it calls HUD Homes, one- to four-unit residential properties that the department acquires after a foreclosure on a Federal Housing Administration-insured mortgage. A HUD appraiser studies the property and the market to set a desired price, a department official said. The homes are sold as-is, and inspections are available only after a bid is accepted.
Homes are listed online and bids are submitted electronically. Unlike most auctions, HUD requires bidders to have a real estate agent who is registered to work with the department.
Other federal agencies that hold auctions include the Internal Revenue Service and Treasury Department. The IRS’ public and sealed-bid auctions — meaning participants don’t know one another’s offers — are typically conducted by a property appraisal and liquidation specialist, according to the IRS Web site. Bidders should request a notice of sale, which describes the property, lists any minimum bid required, explains the bidding process and provides a contact person. Like most government auctions, the IRS does not guarantee a clear and insurable title, meaning outstanding liens could exist against the property.
The U.S. Treasury’s Executive Office of Assets Forfeiture auctions properties through EG&G Technical Services that have been seized in criminal proceedings. The properties are sold as-is, but open houses are available. The auctions are held on-site through open, progressive voice bidding, and a broker is not needed, according to Treasury’s Web site.
“An auction can be a great place to buy a property for a first-time homebuyer because you can potentially get it at a substantial discount,” Aronovich said.
But because the bulk of pre-auction research — such as determining the home’s value, including allowing for liens — is left to potential buyers, he suggested first-time homebuyers “probably should get somebody involved that has a little bit of real estate experience.”
