Homes for Auction Can Be a Great Deal
It is a buyer’s market. This is true in every industry during this economy: consumers are setting the pace and, to a certain extent, the price of items from electronics to vehicles to real estate. The number of homes for auction has increased markedly in the past two years, and this presents buyers with an excellent opportunity to purchase a house for a much lower price than they could expect with a traditional sale.
Auctioneers have noticed a shift in the attendance at real estate sales. Traditionally, these auctions drew investors. However, real estate agent and auctioneer, Kent Anderson, says, “I have seen a marked change in audience. I’m seeing less investors and more first-time home buyers....” But because first-time home buyers are not typically well versed in the auction business, it is essential that you do your homework before you place your first bid. Here are some tips that will be useful:
The best thing you can do to prepare for an auction is to attend a few without intentions of bidding. This will give you a preview of the process and allow you to get a feel for the listings and how bidding works. It is easy to get caught up in the excitement of bidding; getting used to the atmosphere will help you keep a clear head when you are bidding yourself.
Be aware of how your particular auction will work. There will be a publication of the terms and conditions and the auctioneer will also likely announce these verbally before bidding opens. It is important to note these terms and conditions because they can affect which properties you bid on and which you bypass. You will also receive a packet of information on the property that you are considering purchasing. Read this carefully.
One thing to be aware of: the minimum bid is not the reserve. The minimum bid is where the auction starts, while the reserve is the absolute lowest price the seller will accept. The minimum bid may be $75,000 and the reserve $100,000. It is possible to “win” an auction but not meet the reserve. When the reserve is met, the auctioneer will typically announce it.
If the auctioneer does not say “Sold,” at the close of bidding, then you may have conditions to meet before you can complete the sale. He may say, “Sold subject to seller confirmation” or simply announce that you have the high bid. Then, if you have not met the minimum reserve, you have to pay the balance in order to purchase the property. This may or may not be worth it to you.
In order to place a bid, you will have to put down an earnest deposit (to demonstrate your intent to purchase), and typically you have to show bank statements proving that you have the funds to purchase the property. This may be a surprise to some, so make sure you are prepared with the proper documentation before you attend an auction to bid.
Attending auctions for seized homes can present a tremendous opportunity for buyers. Be prepared before you raise your hand to place a bid.