Get the 411 on Real Estate Auctions: Know Before You Go
Jun 27, 2017 03:56PM
● By Linda Ditch
Not all auctioned real estate is distressed or foreclosed properties. Some are being sold because the owner has died and their estate has authorized the sale. Others are on the auction block because the owner needs to sell by a specific date, such as in the case of a job relocation.
There are three types of real estate auctions. One is an absolute auction, where the property is sold to the highest bidder, no matter what the final price. Another is a minimum opening-bid auction, where the bidding starts at a set price and goes from there. Then there is the kind of auction where the seller reserves the right to say yes or no to the highest bid.
Real estate auction listings can be found in local papers or by checking out area auctioneers’ websites, such as Paul McInnis Inc. (www.paulmicinnis.com), Sullivan and Sullivan Auctioneers (sullivan-auctioneers.com), and William A. Smith, Inc. (wsmithauction.com) You can also check on the popular real estate website Zillow.com.
Before going to an auction there are some steps you need to take to be prepared. First, contact your lender. You will need a letter showing you have secured financing to register for the auction. The letter will state the amount for which you are approved for a specific period of time.
Next, attend the auction previews. These take place in the weeks leading up to the auction and allow you to look over the property, ask questions, and go through the full terms of the sale. Be sure to ask what the minimum starting bid will be.
After the preview, do your homework. Check out the neighborhood to get a sense of property values in the area. If you plan to make improvements to the property, look into the potential costs. This will help you know the price to set for your maximum bidding limit so the excitement of the auction won’t entice you to bid higher than you had planned.
Auction properties are sold “as is,” so if you want an inspection done on the property, it will need to take place before the auction. The seller will not make any repairs to the condition of the property unless specifically noted ahead of the sale.
Also, have a down payment ready. If you’re the winning bidder, you will need to make a down payment, either with cash or a cashier’s check. Typically, the amount is 10 percent of the sale price (check with the auction company.) Have the cashier’s check made out to you so you can return it to the bank if you don’t get the property. This payment is nonrefundable unless the seller is unable to close on the sale.
Finally, know what you will be responsible for after the sale. If there are outstanding liens, taxes, or other legal issues connected to the property, you may be responsible for paying them. Have a title search done to look for any attached financial obligations.