Going once. Going twice. Sold to the highest bidder!
Welcome to the world of property auctions.
If you’re looking to buy a house for your family or as a real estate investment, you can’t go wrong with property auctions. Most of the time, winning bidders can get properties at 50% off with the right strategy and proper research.
Please take note of the word “most.”
Due to the unpredictable, risky, and volatile nature of auctions, it’s not for everyone. Especially the faint-hearted. You can’t always win at an auction, but with proper research and due-diligence, winning the house of your dreams isn’t far-fetched.
Look Before You Bid
You can get a great deal at an auction, provided you put in the work and do your due diligence first. Going in half-cocked and bidding blindly on a property without prior research is a gamble that’s not worth taking. Properties bought at an auction are “as is,” and you can get a lemon of a house chock-full of problems.
Here are a few guidelines that can help:
Before Going to an Auction, Search for Property First
To locate the best possible deal, you need to visit different auctions. Get your hands on the area’s foreclosure data to determine which auction will have the property you want to buy. Ask a local realtor contact for help on this process.
Conduct a Thorough Research of the Property
Make a determined effort to learn everything you can about the house you have an eye on. A property records search can get you information on the estimated market value, any money owed, property owner information, and other data.
Hire an Attorney
It’s critical that you have an attorney working with you every step of the way. Attorneys can do a title search to discover if the property has any liabilities. Remember, any prior liens and unpaid real estate taxes can become your responsibility. Too many red flags on the legal status of a property is a non-starter, and you shouldn’t waste time bidding.
Related: Buying a Foreclosed Home at House Auctions: What Real Estate Investors Should Know
Types of Auctions
There are two types of auctions you can participate in. The first one is the traditional live auction, where you have to show up in person to make your bid. The other one is an online auction where you can bid from the comfort of your pajamas, anywhere in the world.
Live Auctions
Live auctions are usually held in any public location. However, the most likely sites are the county courthouse, right on the property or in a hotel ballroom. Make sure to double-check on the spot of the live auction and the date to avoid wasting time. Do research on the live auction to know the rules and regulations you need to follow.
If you want to attend a live auction and make a bid, you have to register and show proof you can pay for the property. If you can show that you have enough finances to purchase the property at full price, you can bid.
Online Auctions
A lot of savvy investors are choosing online auctions because it’s convenient. You can bid from anywhere over a set period of either days or weeks. Online auctions also offer more options for buyers. You can bid on all sorts of properties, including commercial and bank-owned, plus non-distressed homes.
You need to register before you can bid online. You also have to show that you are serious and can pay by making a refundable deposit. You’ll get back your deposit if you don’t win the auction.
Property Auction Due Diligence
There are a few due diligence rules that you need to follow to make sure you get a good deal.
Inspect the Property Yourself
Most of the time, you won’t be able to go inside a foreclosure property because there are still people living there. Your best bet is to drive to the location to get an idea on how the house looks like and the current state it is in. Rule of thumb: if a house looks good from the outside, it’s usually lovely on the inside and vice versa.
You’re Buying the Property “As Is”
Keep in mind that auctioneers and lenders don’t disclose the actual condition of the property. Unlike a standard real estate sale, any cosmetic, structural, or mechanical problems are the responsibility of the property buyer. Pour your effort into research to avoid getting a run-down property full of issues. Even if you win, the property isn’t yours until you have the certificate of title in your possession. Hold off on the celebration and wait for the title.
Secure Your Financing Beforehand
Most property auctions accept bank money orders, cash or cashier’s checks. In most states, be aware that you have to pay in full immediately after the auction if you won the bid. A few states allow winners to pay a percentage at the auction and the rest within a set time. Some county auctions require an advance deposit.
Final Word
With enough effort on research and due diligence, you can find a fantastic deal on a foreclosed property at an auction. Know what property you want first, check it out and look for auctions that sell it. Don’t hesitate to hire an attorney or ask a realtor for assistance.
Good luck and happy house hunting!
This article has been contributed by Emily Andrews.