In This Economy, You Can Find Great Values at a Real Property Auction

In the last few years, the housing market has been taken on a rollercoaster ride that has left many prospective homeowners hesitant to make the commitment to buy.  But as prices have declined, buyers are seeing unprecedented opportunities to purchase homes and land at prices that are lower than they have been in years.  In this economy, the buyers have the more advantageous position because sellers want to convert property to cash:  it can be a great time to find a great deal and purchase a home. 

Part of the cause of the housing crash was that housing prices were vastly inflated; speculation and poor lending practices contributed to this, making home prices soar.  As the housing market saw a dramatic decline, homes were often valued at far less than the owners owed on their mortgages.  Foreclosures became increasingly common:  in the first quarter of 2009, there were 90,696 foreclosures in the US, according to the Office of Thrift Supervision and the Office of the Comptroller of the Currency.  In the second quarter, that figured jumped 17 percent to 106,007. 

As a result, there has been a corresponding jump in real estate auctions, which offer buyers a chance to find property at a fair market price – not one that has been inflated by speculation or reckless lending.  Another benefit for the buyer is that banks want to recoup some of their loss.   Holding property is not as financially beneficial as having liquid assets.  Most often they want to cut their losses and make back at least a portion of their original investment.  This results in lower prices for home buyers.

Because of the rise in foreclosures, it is becoming increasingly common for home buyers to attend auctions.  Prior to the housing crisis, there would have been far more investors present.  While these auctions can be tremendously beneficial and allow people to buy homes that they can afford, it is important to make sure you are getting a great deal.  This is especially important because investors are already experienced in these types of transactions. 

First, make sure that you check the market in the area in which you are considering purchasing a home.  You will get a sense of what comparable houses are selling for in traditional sales, so you have an idea of where to cap your bid.  This is also essential:  set a budget.  If you can afford a home that sells for $100,000, do not bid on one that costs $120,000.  It’s that simple, but many people get caught up in the excitement of bidding,

or they become fixated on one particular house.  If a home is not in your price range, it is better to walk away.  You will find a great deal, it just might not be at your first auction.

Make sure that you are aware of the condition of the home before you bid.  If it is a “fixer upper,” that is fine, as long as you are aware of that and are willing to put in the necessary work and money.  This should also be reflected in the price of the home.  If it is too much based on the condition of the home, continue shopping.  This is the buyer’s market.  There are more homes, so you do not have to settle for one that is either in disrepair or costs too much for its condition.

Doing some preliminary homework and being patient for the right house to come up for auction will help you get a great deal on a home.