Auction! Going, going, GONE!!
Auctions have come a long way! In today’s internet-saturated world, you can bid and buy a foreclosed home online in a few clicks. Buyer beware, however, as the deals are as good as the time spent researching the property.
Many foreclosures are now being sold via auction in a format known to banks as “alternate disposition”. Typically, homes that have been on the market (in the MLS) and unsold will eventually make it to the auction block. This isn’t always the case however as I am seeing more and more sellers sending properties to auction prior to going on the market with a real estate agent. The opportunities for a deal at auction are good, but do your research.
Here are some tips that I have found from my experience:
- The seller has a reserve price. This is the price that they are willing to sell at and you will not know what this price is. If you are under the reserve price the auction company may ask you to increase your bid or try to get the seller to lower their reserve.
- The minimum bid price doesn’t mean the seller will accept that amount. The “previously valued to” price also means nothing.
- Most auction companies have a “buyer’s premium”. This fee is added on top of the top bid price and can be as high as 5% of the auction. This is the fee you pay to the auction company for the pleasure of working with them.
- Homes may be occupied. Do your homework here. If the property is occupied, the person occupying it has rights.
- Financing may not be available. Cash may be the only accepted payment. If you expect to get a mortgage for a cash sale, you may lose your deposit.
- There are significant terms and conditions. Make sure to read all the fine print.
- Closing is generally easy and through a title company. Double check the terms and conditions to see what type of title is conveyed.
The very nature of auctions is public so spending some time watching the process online will give you a good idea of the deals available. A few sites you may want to visit for online auctions are auction.com, HomeSearch, Hudson and Marshall and Williams and Williams.