Due to the large number of foreclosures in today’s Market, we see a lot of properties being sold through a Public Auction. This may be a great benefit for investors or people simply looking to get the best deal possible on a home. We all know that it is a buyers market, and that the market is flooded with foreclosures and other bank owned properties, giving buyers an even better chance at saving a few bucks. Everyone wants to save a little money, right? There are some things that you should consider before placing a bid on the home of your dreams.
Always keep in mind that the homes at an auction are being sold way under market value, and way below what the home was originally purchased for. Lets say you see a home that you like being advertised for public auction, you attend the auction and no on bids on the home. The home is not going to be listed for any less at the next auction, it may not be auctioned again at all, and be taken over by the bank and sold as an REO. So if you have a reasonable bid, bid on it. Chances are you will not get the opportunity again. Any savings is better than none, keep that in mind and you will be good to go.
Once an individual bids on the home and a reasonable bid is accepted, you must sign the contract and form a contract that is legally binding. This means that no one else can come in with a higher bid on the home. In just about 28 days, the sale will be complete, giving the buyer possession of the home. In normal sales it can take 30-90 days for the house to close escrow. In today’s market, it may even take a little longer.
As with any sale, problems do tend to arise with Public auctions, that you should be aware of before making your bid. Just like any sale, there are service fees of up to 3% that are charged upon the sale of the home. In some cases they may even charge a fee to enter the auction. Unlike buying a home that is not in distress, you cannot inspect the property prior to purchasing, it is sold at in “As-is” condition, leaving the buyer responsible for said repairs. And in some cases the repairs may end up costing you more than you plan on profiting, if purchasing the home for investment purchases. A loan tends to be a little harder to obtain in this type of sale, since there is the chance that there may be liens, or money already owed on the note, that the previous owner did not take care of upon surrendering the home back to the bank.
As an individual or investor, you want to make sure to do extensive research on purchasing homes through and auction before doing so. Preparing for the bidding is also important, because once the bid is accepted, you will have to sign the contract right then and there, and if backing out, you can be severely penalized. If preparation and homework is done prior to going to the auction, this can be a purchase that really pays off in your future.