Interest rate hikes may be delayed. Great news for homebuyers!

Good news for home buyers! 

Federal Reserve Chairman Jerome Powell raised the possibility that the central bank is willing to hit the brakes on interest rate hikes in the near future.  This should slow mortgage rate increases, allowing you to buy more home for your money!

The Federal Open Market Committee (FOMC), the central bank’s policy making arm, will meet again in December, and many observers believed another rate hike would occur at that time. But in prepared remarks delivered today before the Economic Club of New York, Powell stated the central bank had “no preset policy path,” adding that he was cognizant of the concerns that raising rates too quickly would disrupt the economy.

“We know that moving too fast would risk shortening the expansion,” Powell said. “We also know that moving too slowly, keeping interest rates too low for too long, could risk other distortions in the form of higher inflation or destabilizing financial imbalances. Our path of gradual increases has been designed to balance these two risks, both of which we must take seriously.”

Powell made no specific mention of President Trump, who appointed him to the Fed’s leadership and has since made several harshly critical remarks of the Fed’s rate hikes. Powell defended recent rate increases, noting that “interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy—that is, neither speeding up nor slowing down growth.”

Thanksgiving Fun Facts

Should I Buy A Home From An Auction?

The traditional channels of searching real estate listings and working with real estate agents aren't the only way to acquire

a property. Experienced real estate investors often purchase properties at auctions. But auctions aren't limited to professionals – novices have purchased their homes at auctions, too.

How Do Properties End Up at Auction?

The two main types of property auctions are foreclosure auctions and tax lien auctions. Before a property reaches this stage, several things have to happen.
First, the homeowner has to have not paid his mortgage for several months. Then, the bank files a notice of default with the county recorder. If the homeowner doesn't pay the balance owed or renegotiate the loan with the lender, the home can be put up for auction. The amount of time it takes from when the homeowner stops paying the mortgage to when the home ends up at auction varies, but can be anywhere from a few months to a year or more.

The other main way a home ends up at auction is when the owner doesn't pay property taxes or becomes severely delinquent on state or local income taxes. In these cases, it is the unpaid tax authority (not the bank) that seizes the property.

How Property Auctions Work 

Auctions take place at local government courthouses and other locations chosen by auction companies, such as hotel conference rooms. Homes are also auctioned online. Foreclosure auctions are held by bank-hired trustees. Tax lien auctions are conducted by local sheriffs.

Winning a property at these auctions can work in two different ways. In a lender confirmation auction, the lender doesn't have to accept your offer even if you are the highest bidder. In an absolute auction, the winning bid gets the property.

The starting price of the auction may be the balance remaining on the mortgage or may be a lower amount designed to spur bidding. In the case of a foreclosure auction, the lender is not allowed to profit from the auction. Often, these properties are sold at a loss, but if there is a profit, it is supposed to go the homeowner after the mortgage, and any other liens are paid.

What can potential bidders learn about auction properties before bidding? Some auction companies have open houses so potential bidders can walk through the properties ahead of time. Listings describing the properties to be auctioned are also available. Other times it is only possible to drive by and see the outside. To discover properties that will be auctioned off, potential buyers can check county recorder websites and foreclosure listing services.

As for payment, bidders should bring to the auction a cashier's check for the amount of money required by the auction holder. Winning bidders will pay any auction fees and/or bidding fees and put down an earnest money deposit on the property they are purchasing before leaving the auction site. The winners then go through escrow and closing just like with any other home purchase. Bidders at property auctions are often real estate investors who can afford to pay cash, but for auctions that allow financed purchases, it is best to get prequalified ahead of time.

Some auction houses prefer that you work with their affiliated lenders and will have those lenders on site at the auction. However, do your research beforehand, using a tool like a mortgage calculator to determine the interest rates available from competing lenders. This may give you some leverage when working with a bidder's lenders.

Benefits

Why would anyone be interested in buying a property at auction? For one thing, an auction offers a first chance to snap up a type of property you might not otherwise be able to afford. Because of the extra risk involved and because fewer people may be interested in the property than if it were available through traditional channels, prices can be lower. Auction properties aren't always great deals – the auctioneer could set a hidden reserve price on it, the minimum you must bid – but the potential to get a luxe residence at "fire sale prices" is such a big draw that, for many people, it compensates for the numerous potential drawbacks.

Drawbacks

Properties being auctioned off aren't necessarily hidden gems. If a property winds up at auction, it means the owner was having financial trouble, so the house may have deferred maintenance problems. It might even be completely trashed. Also, there may be claims against the home – not just the aforementioned tax liens, but contractor liens or a second mortgage. Bidders can avoid this problem by checking with the auction house to ensure that the property has clear titles.

Buying a property at auction often requires a lot of cash. Each auction company/county government has its own requirements for payment, but you will probably need some amount of ready money just to secure your bid. Down payment amounts and methods of purchasing often depend on the property and the auction house. More flexible financing options may be available by purchasing a bank-owned property the traditional way, instead of at an auction.

Auction properties sometimes do not allow for a home inspection or even provide a view of the inside prior to the auction. If you can't afford the risk of buying a property in poor condition, stick with auctions that allow you to inspect the property before bidding. Without this information, it can be hard to know what you're getting into, what a property's repair costs will be, or the true value of property until you've become the owner.

Also, in some cases, the (former) owner or a squatter will be occupying the property, meaning you will have to evict them – a process that can be unpleasant at best, and lengthy and expensive at worst. 

The Bottom Line

If you're interested in trying to pick up a bargain property at auction, there's a lot to learn. Auctions can be a riskier way to purchase a property than buying a property through a real estate agent, so it's important to be extremely well-educated about the process and about the properties you are interested in bidding on.

Foreclosed homes may be financially appealing, but there are many obstacles to consider before buying.  Also, just because a home is for sale at auction doesn't mean that you'll be able to get it at a good price (or that the home is a good deal at any price – it could be a money pit!). 

Also buyer beware not all auction sites are the same.  One review on Trulia.com warned about Auction.com.   Here is what the reviewer wrote from his experience.


"Jim Breunig, Home Buyer, Pittsburgh, PA
Fri Dec 27, 2013
Let me start by saying that I am a flipper, and have purchased many foreclosed home through just about every way imaginable. Please, please stay away from bidding on Auction.com. I recently participated in one of their online auction. This is the worst "platform", or process of any online real estate auctions. I was the "Winning Bidder", 12/7/13 which translated in English means nothing. I complied with their ridiculous terms and conditions (Please Read Terms Fully) Sent my earnest money within the required time frame to Service Link (Closing Co) located in Pennsylvania, (I'm in Florida). After that I heard nothing. I had to place a call once a week to auction.com and got the standard runaround mushmouth BS congratulating me on being the winning bidder for three weeks, to which I requested a signed sellers acceptance... the response, let me check on that. Bid pending, was the answer. Now after 3 weeks have gone by, I get an email and a call letting me know my offer was rejected. Fine, I can accept that, it was a pretty low bid, so I ask for an estimated time frame in which I can expect my earnest money to be returned. This is when the real fun starts, 6 emails later and being informed that Auction.com has nothing to do with the return of my earnest money ($2500.00) I am shoved off to try and collect it myself from Service Link, Which has yet to respond. The moral of the story, deal local, if you don't bid on auction.com, or if the bid doesn't reach about 90% of market value it will revert back to the original list agent. Wait, and deal with a local Real Estate Agent and Title Company. Don't waste your time, or put yourself through the stress and aggravation. I have purchased other properties online through Williams and Williams and Hubzu, both closed successfully and without issue and their communication was significantly better than auction.com. I will post a follow up with how long the wait will be to get my earnest money returned."