BUYING A HOME AT AUCTION

Purchasing a property at an auction, whether online or live, is not uncommon these days. These properties usually come up for sale in these situations: when an owner deceases, when the owner just wants to get rid of a property and cash out quickly, or when the bank has taken back a home that has gone into foreclosure. Here are some things to consider before getting involved in an auction purchase.

1.
Complete the appropriate research on the property being auctioned. For example: if it is a single property that went into foreclosure, acquire the details of the property: its size, its amenities, and what the opening bid is. Check with the county recorder or local title company for a list of properties currently in foreclosure.

2.
Compare the sales prices of similar properties in the area so you have a good idea of what the subject property is worth. Properties within 3 miles of the subject property are the most reliable predictors of value. Compare sales of properties with the same number of bedrooms, bathrooms, and square footage if possible.

3.
Get financing. Bring your pre-approval letter from your loan officer to the auction. Most of the time you will have to register before bidding and show proof of funds with the bank letter and a cashier's check. Typically, homes at auction require a deposit of from $1,000 to $5,000 for an accepted bid, and the remainder of the financing must be in place within a specified period of time, usually within 30 days. If you are lucky enough some auctions will have financing via Contract for Deed (when the owner finances the property for you so you don't have to take out a loan).

4.
Know your price limit. Auctioneers work hard on creating an atmosphere of agitation and excitedness. Don't get swept up in the moment. Know how much you are willing to spend and stick to it. If the bidding goes above your price, get up and walk out. You'll be less inclined to get sucked into the bidding.

5.
Go to a few auctions first before you actually purchase a home using this method so you can see how it takes place. Sometimes there will only be 5 people there and other times it will be a packed house. It will help prepare you for when you get serious about buying a home this way. There are many deals getting swiped up every day during real estate auctions. Not all the savvy investors can be at all the auctions. If you go to enough, you are bound to find a deal you can't pass up!