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Due Diligence. What are the things you should know before buying a foreclosure home at an auction?

They are sold as-is at the trustee auctions making foreclosures a potentially risky investment. In an ideal world, what would be all the things you would want to know about the home before bidding on it?

Ideally the things that you want to make sure you know are the following:

1) Does anyone live there, tenants or owners? If people are living there then you will likely have to go through an eviction if you buy the property. That's an added expense in money and more importantly time. Depending on the state in which your property is located, this could take a few months.

2) Are there any liens? Again here you have to know the laws that applies to your property. In Colorado most liens are wiped out through the foreclosure, however some liens are not (Property Tax liens, IRS liens, etc.), you had better know which liens get wiped and which ones you may be on the hook for when you take title. It's easy to find out what liens exist, you simply order and Ownership & Encumbrances report from a Title company that should cost you between $5-10.

3) Property condition. This is the toughest to know. You can't really do a full inspection of a property being sold at auction. You can look at it from the outside, maybe peek through the windows, but you just can't get in there are fully find out the condition of the property. I would say as a general rule, don't buy property that is more than 30 years old at an auction.

4) Know what the resale value is. Real estate is all in the buy. If you buy a property right then you should do well. What I mean by that is know what it's worth, what it needs to add value, and what you can sell it for. You need to do your due diligence on the neighborhood. Schools, parks, nearby entertainment and recreation, these things create value for property. You should have a great real estate agent on your team that can really tell you the value of the property and can back that up with facts, and then when the time comes, sell the property for maximum value.

Real estate is simple, don't confuse that with easy. Do your homework, know the costs and the value, and DO NOT OVERPAY. If you do your homework and decide that you can't pay more than $100,000 for a property, don't get caught up in the emotion of it and pay more. You will lose money that way.