Real estate auctions give interested buyers the opportunity to purchase a home by bidding and potentially obtaining a property at a less expensive selling price. Before deciding to purchase a home at an event such as an auction, it is important to know exactly what you might be getting yourself into. Having a clear idea and understanding of what it takes to purchase a home in an auction will help boost your overall confidence and improve your experience.
What is the history of the homes
Typically, homes that are being auctioned are were foreclosed on, according to realtor.com. A house can be put up for auction if a homeowner has not paid their mortgage for several months, but the actual time tends to vary.
Knowing the history of the homes that wind up being auctioned can be especially helpful when considering purchasing a home at an auction. Bankrate noted that in some instances a property can be abused by a previous homeowner out of frustration. Knowing this history can help you decide whether it is worthwhile to invest in a house that may have significant and even irreversible damage.
According to Zillow, home auctions often hold open houses as an opportunity for interested buyers to check out the property and even conduct a home inspection. Never dismiss any issue you might notice when checking out a home that is about to be auctioned. Some damages might wind up costing you a great deal down the line.
If you are willing to take on a substantial renovation project, it is still important to get an idea for what you will have to incorporate into your projected remodeling expenses. Realtor.com also recommended keeping in mind the amount of time it may take to remedy various issues or complete projects. Factoring this in can help you decide which property matches your needs the best.
Know the auction vernacular and researching
Becoming familiar with the terms used during the auction can help you become more comfortable and confident when participating, according realtor.com. It can also help you decide whether you should eliminate certain properties from the list of those you might be interested in. For example, if an auction advertises the property to be sold as-is, that indicates that the buyer will be responsible for any and all upgrades, updates and repairs. If you decide that you are not willing to take full responsibility for all repairs, that property may not be the best selection for you to bid on.
Additionally, realtor.com noted knowing the type of auctions there are can help you focus your efforts. A reserve auction gives the bank that owns the home the ability to reject an offer if it does not feel it is sufficient for the value of the home. An absolute auction ensures the highest bidder will automatically gain possession of the property and a minimum-bid auction entails an event where the bidding will start at a certain amount.
While getting a deal may be appealing, properly preparing is key, according to Bankrate.
"Getting a steal at auction boils down to preparation," said Rob Friedman, a presider of over 500 auctions every year. The biggest auction mistake, Friedman says, is lack of homework. "You have to set out to quantify risk, inspect the property well, and then quantify the necessary repairs and run price comparisons, or 'comps,' in the neighborhood so you'll know the values."
If you decide to move forward and invest in a property through an auction, recruit the help of professionals and veterans. This can help immensely when starting your auction experience.