On Buying Property at Auction – What to Know Before You Bid
Posted by admin under: Auction Schedule Mar 07
Buying property at auction can be a great deal for the buyer, but you need to take a few precautions and follow a few imperative steps before bidding on a property. There are also a few differences when buying from auction rather than on the regular market, but knowing the procedure and taking a few precautions can land you a new home for a low price.
The first step in buying property at auction is to ask your bank for a pre-approved home loan. You cannot back out of an agreement once your bid is accepted, so it is imperative that you not only have pre-approval but that you keep within the approved amount. You must also save money for a down payment as houses obtained at auction require approximately ten percent down. Without these two things, you should not even begin to inquire about homes that are going to auction.
Once you have your finances in order, check the local paper for listings and/or contact a real estate agent who is knowledgeable about this part of the market. Much like the process of buying traditionally, you can schedule a showing on properties in which you have interest. This is the point at which you will need to do some hardcore investigation. You may even want to arrange a home inspection; when you are looking at buying property at auction that includes a home, you are also looking at repairing the home yourself. You will not be able to bargain with the owner concerning carpet or paint allowances or broken fixtures; you are buying the home “as is.”
Do not just research the house itself. Take a good look at the neighborhood, and ask a realtor for a cost comparison, or a list of “comps.” This will entail a list of comparable recently sold homes in the area, their original list prices, and their final sale prices. You want to know what a good price really is for a property in which you are interested. Do not assume that the auction will stop taking bids once market value has been passed; it is your responsibility to know at what price you are getting a good deal and at what price you are surpassing area comps.
Incidentally, “as is” includes more than just repairs. The buyer will also be responsible for taxes owed on the property, so make sure you are putting pen to paper. So far the cost of the home includes your winning bid – a certain percentage of which will need to be cash – costs for repairs, back taxes, and though the home may be up for a good list price, with all expenses considered, you need to pay strict attention to the numbers. Are you going to end up paying market value after all the repairs and taxes accrue?
Once you have decided to go ahead with the process, know your limit so you can bid within your budget including all the previously mentioned incidentals. Have fun, and good luck. Do not get discouraged if your first attempt does not work out, you will get better at researching and landing a good deal with each experience.
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Wednesday, March 7th, 2012 at 7:17 pm and is filed under Auction Schedule. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.