If you’ve watched any real estate shows on t.v. recently you’ve probably seen some home auctions. Buying homes at auction are popular in a lot of circles around the country and they have a certain excitement that surrounds them – due to the possibility of getting a superb deal. While there are some scenarios that can lead to a stellar price, you should know what to expect and if buying a home at auction is right for you.
Know The Format
Buying a home at auction isn’t as simple as bidding more than everyone else. There are two types of auctions – subject to lender confirmation and absolute. In a subject to lender confirmation the lender doesn’t have to accept your bid. In an absolute auction the highest bidder wins.
Understand Why It’s Happening
The overwhelming majority of time an auction is occurring because the house is in foreclosure either because the homeowner didn’t pay their mortgage or their property, income, or state taxes. Before it goes to auction there are several steps taken by the lender to keep it from going to auction. This process can take several months up to a year or more. With this in mind an auctioned house can be neglected for a while. Therefore, it’s best to schedule a walk through an be aware of any issues.
More than likely you’ll need a cashier’s check required by the auction holder. If you win you’ll pay auction fees and then go through escrow and closing just like a normal purchase. If you can swing it, bringing cash to the table can make the entire process quick and easy.
Why Buy a Home at Auction
The most obvious reason as mentioned before is the chance to scoop up a house at a low price. You won’t always get a great deal, but your competition will be less and your chances are greater.
Why Not to Buy a Home at Auction
With great reward comes great risk. There are a few risks involved when buying in this format. You’ll need at least some cash to pay for the minimum bid, fees, etc. If the property is being auctioned due to a tax lien then the title may not be clear. Some auctions don’t allow for an inspection or a walk through. This scenario is very risky. And finally the previous owner could still be living there which means you would have to evict them.
No matter how you decide to buy a home – at auction or through traditional means – let the experienced and knowledgeable staff at Exit Realty Bob Lamb & Associates help guide you.