Tips on Buying a Home at Auction

I guess you all know that with real estate foreclosures up, there are deals to be had…and many of those properties for sale will be available on the auction block. This is not something for the novice or the faint of heart, but if you want to venture in the world of auctions, here are some things you should know before you start.

First, there are some great web sites that list almost all the auctions out there… so go find them.  Hint: Foreclosure.com is a good place to start!

Then, you’ll need to ask a few questions. You want to know if the auction is a reserve or absolute auction? What’s the difference, you say? Well, there is actually quite a big difference. You want to shoot for the absolute auction because if you are the winning bidder, you will get that house not matter what. In a reserve auction the seller or the bank can hold on to the property if they do not get the minimum bid they want.

You also want to know if you can rescind the contract. This means that you may have 3, 2, 1 or even 0 days as a cooling off period before the contract is binding. Find this out before you start bidding. Each auction is different and you may find that you have a change of heart.

And finally, you want to know if there is a Buyer’s Premium. Now this may sound like something good! But it isn’t. It is actually a TAX you pay the auction house of an amount of either 5 or 10% for being the winning bidder on the property. An additional $10,000 on a bid of a $100,000 property could really reduce the great price you thought you were getting!!

Now do your homework.  And if all this is daunting for you….then consider hiring an experienced realtor to guide you through the event. This is not the time to be experimenting with your bank account and first timers can find themselves buying a property that isn’t such a good deal if they don’t understand the comps and the marketability of each property.

+ Check out the sales prices of the homes you are considering. You can go to several web sites and view properties on the market. If you are in a major city, your local multiple listing service is probably available online through a site like <(cityname)homesearch.com> or you can try Zillo.com. There are loads of possibilities here so just Google a little and you can find some comparables.

+ Don’t forget to check out the school districts. We all know that schools are a major determining factor for long-term home values so get online and look for school ratings.

+ Visit the home before you bid on it. And better yet, take your contractor by there and get some bids on any work that needs to be done.

+ Make sure that your financing is in order before you bid on a property. If you get to the auction and you bid on a home without proper financing, you could lose 20% of the price of the home for this big mistake.

+ Have the following list of items ready when you go to the auction: your maximum bid, a cashier’s check, your picture ID, a prequalification letter from the bank, and the address or photo of the property.

Final tips on getting the best deal at auction:

1. Bid on properties at the front of the list. The best deals are at the first while everyone else is trying to get their feet on the ground!

2. Wait out the bidding war on the house you want. If others are bidding, sit back and wait until the very end to place a bid.

3. Dress like a millionaire and sit up by the auctioneer. Everyone else will think that you are with the bank and they will be intimidated!

Best wishes with these tips and hope you come away with a great deal!