Buying Auction Property is Easier Than You Think
Because of the recent disruption in the housing market and increase in foreclosure rates, many people have become more interested in real estate auctions. Only a few years ago, these would have been attended primarily by people for whom real estate investment was a business. Today, prospective home buyers are attending in the hopes of finding an affordable house or land for their own use. While the thought of buying seized or bank owned homes may be intimidating, it is actually easier than many people realize.
The first step – and quite arguably the most important – is to do your research. Home auctions are listed in the Classified section of newspapers or online; if you regularly monitor these listings, you can spot properties that would be suitable for your needs. Before setting out to an auction, though, it is important to get pre-approved for a mortgage. Speak with your lender and determine what you can afford. This will help you set a budget, and keep it, at auction. It is also vital that you have financing lined up when you win an auction.
After this preliminary step, visit the property you are considering. Visit the block and check what similar houses in the area are selling for. This gives you a clear indication of the value of the house and helps you determine what you should pay for it. For instance, if there are several comparable houses on the market for $150,000 that are not selling, you may want to cap your spending at a much lower figure. Also, if you are attending a foreclosure auction, you will become responsible for loans and liens on the property if you win. This is something to figure into the cost of the house.
Many experts also recommend getting a professional inspection done if you are seriously considering purchasing it. It may be impossible to rescind a winning bid, meaning you are legally bound to purchase it. You need to know what you are purchasing. Does the roof leak? Is the electrical system up to code? Will you need to replace the furnace? All of these questions should directly affect your maximum bid.
When you go to an auction with the intention of bidding, a deposit is required. This must be in the form of a certified check made out to yourself. This represents an intent to purchase and a validation of your ability to finance. If you win the auction, the check is transferred to the auctioneer. If you lose, you simply put it back into your account.
The bidding itself may be intimidating, especially if you are up against seasoned investors. It is a great idea to attend several auctions without bidding to just see how the process works and get used to the atmosphere that an auction can create so you won’t get caught up in the excitement when you are bidding. When you feel comfortable with the process, jump in. Make sure, though, that you stick to your budget. Don’t exceed it: with foreclosure rates rising, there will certainly be other properties coming up for auction.
If you win an auction, make sure that you get all the documentation you need to take ownership of the property. Ask the auctioneer about any other steps that need to be completed before you can take ownership. Many people find it helpful to bring a real estate agent with them so they have a knowledgeable representative to guide them.
While auctions can be nerve-wracking for beginners, the deals that you can find make it a worthwhile endeavor. The key is to be prepared, do your homework, and stick to your budget.