A Division of Silverhawk Realty

The Low Down on Property Auctions

Although property auctions are usually more up the alley of a seasoned real estate investor, you too can be a player in the property auctioning game. Acquiring property at an auction is certainly more risky than the traditional method, but if you’re willing to take a chance, you could end up getting a great deal on a house. Let’s take a look at the pros and cons of buying real estate at auction.

The Downside of Property Auctions

While some great deals can be had at auction, there sure is a lot of homework to be done. Not all property auctions are the same. Many times, the rules are different and that means do your research ahead of time to avoid surprise fees later.

Some auctions do not allow bidders to walk through the house previous to the event. You can only guess what the condition of the inside will be based off of the exterior.On that same note, be aware of how properties end up at auction in the first place. Their owners were struggling financially, which could mean the property was not well kept nor regularly maintained. The previous owners may have trashed the place before they left, or worse; it may be that they never left! In that case, you would need to spend more time and money to complete the eviction process before moving in or renting out. There could be thousands of dollars in repairs that need to be made… or not. You simply won’t know if you’ve made or lost money until after the sale.

The Benefits of Property Auctions

Property auctions aren’t all bad. There’s a reason experienced real estate investors purchase property this way, even with all the financial risk involved. Firstly, because these houses are sold at auction rather than through the traditional Multiple Listing Service, less buyers are aware of their existence. That means fewer people writing offers, making for a less competitive buying environment. Secondly, lenders at foreclosure auctions are not allowed to profit off of the sale of the house. Oftentimes, houses sold at auction are sold at a loss.

More About Property Auctions

Houses end up at auction either because the owners fell behind on their mortgage and were unable to renegotiate the loan, or because the owners failed to pay taxes. This results in a couple of different types of properties at auction. In a foreclosure situation, the starting price is usually at or lower than the unpaid portion of the mortgage.

At an absolute auction, the highest bidder wins. However, not all auctions award the highest bidder, believe it or not. Some auctions are subject to lender confirmation instead.

Be prepared to pay cash as not all auctions allow for financing. If you don’t have the option to pay cash, only participate in auctions that do allow for financing and as with any home search, it’s best to get pre-qualified first. Note that most auctions also come with their own auction and/or bidding fees and that the down payment on a house you’re purchasing at auction is usually due same day.


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