Getting A Real Estate Deal At Auction

Getting A Real Estate Deal At Auction

Are Auctions Worth The Risk?

Gavel and house model for subprime loan crisis concept

Certainly, auctions let you acquire valuable properties at a low price. For example, the National Association of Realtors estimated foreclosed homes were selling at a 14 percent discount in the final quarter of 2014.

RealtyTrac®,the nation’s leading source for comprehensive housing data, released its U.S. Foreclosure Market Report™ for November 2015, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 104,111 U.S. properties in November, a decrease of nearly 10 percent from the previous month and down more than 7 percent from a year ago. The report also shows one in every 1,268 U.S. housing units with a foreclosure filing during the month.

Auctions can be complicated, emotional and financially risky. Here are five tips to help you make a successful bid and beat out the pros when the gavel strikes:

1. Get the rules.

Find out exactly what’s being auctioned. Are the properties subject to existing liens or free and clear? Narrow your focus to a couple target properties that you check for code violations, zoning restrictions, liens (if necessary) and prior sales data.

2. Know the properties and the market.

Physically examine the property if you can. If you can’t inspect, assume the prior owners did not have the cash flow to maintain the property and budget for repairs. Talk to neighbors about residential properties and tenants about commercial properties. Study local market data so you know what to expect after you buy.

3. Get the sale terms.

Cash is the usual bidding currency, but occasionally, lenders make other arrangements. Most auctions require a photo ID, and if you pay by check, you’ll likely need a certified check from your bank. Find out if the auction will be conducted with verbal bidding or sealed bids.

4. Don’t get caught up in the frenzy.

It’s easy to spend more than you planned. Once you pick a property or two, be clear on exactly what you’re willing to bid – and don’t offer a dollar more. In a verbal bidding situation, the action is fast and emotional. Stay calm and within your limits. Assume that other bidders are in cahoots against you and don’t believe anything they tell you about the property.

5. Be certain.

If you have any doubts, don’t bid. To be successful, you must be confident you can buy the property for your price and you can make money on it either by reselling or leasing it. Most auctions sell property “as is” with no guarantee of the condition. So no matter how good the deal seems, be sure you can make money before you bid a penny.

Before you head off to the auction house, contact me to find out if there’s a similar property being sold via the local multiple listing service. Buying through normal channels is safer than buying at auction because you’re able to complete full due diligence before you close the deal.

Quote by RealtyTrac®

Powered by HomeActions for Laura S. Rossinow, Broker, Keller Williams Realty, Newton, MA