You’ve probably heard that there are plenty of real estate deals to be had at auction. While there’s a good possibility that you can get a good deal buying a house at auction, there are some things that you need to know. If you’re thinking about buying a house at auction, here are some crucial points to keep in mind.
What Is an Auction?
A real estate auction is one way to sell real estate outside of putting it on the open market. Put simply, it’s a public and accelerated real estate sales process. Potential buyers participate in open and competitive bidding, with the highest bid “winning” the auction.
What are the Different Types of Auctions?
There are several different types of actions, and not all auctions are suitable for all property types. Here are some different types of auctions and what they entail.
Minimum Bid Auction
A minimum bid auction requires you to bid at least the predetermined amount for your bid to be considered. The minimum bid is typically published in advertisements before the auction, and the auctioneer will also announce it when the bidding is open. If you’re thinking about selling your home, you’ll probably feel more comfortable with a minimum bid auction. This is because a minimum bid auction can safeguard against losing money.
The winning bid in a reserve auction acts as an offer to the seller. The seller can then choose to accept or reject the bid. Typically the seller must make this decision within a pre-specified time period. If the winning bid doesn’t meet their requirements, the seller doesn’t have to sell their home.
Absolute auctions are the type of auction you most commonly see in the movies. Regardless of what it is, the highest bid wins. This could be as low as $1 or as high as someone is willing to pay! If your bid is the highest, you become the new owner of the house. Absolute auctions are popular with potential buyers because there’s no minimum bid, and the sale is final. Typically banks trying to unload foreclosures and government agencies selling properties with tax liens opt for absolute auctions.
Buy a House at Auction — What You Need To Look Out For
No matter what type of auction you decide to try your luck in, the most important thing is that you do as much research as you can on any potential homes. Many homes that make it to auction have been sitting vacant for a period of time. This means that they could have received little maintenance or upkeep and may need some repairs and TLC.
For instance, the yard will likely be a little neglected with an auction property, or the utility service could have shut the power off. In the summer months, with no air conditioning, this can spell disaster. Problems with mold and mildew can quickly grow in a vacant home and can be pricy to fix. Vacant homes can also be targets for vandalism and theft, so don’t be surprised if there are missing appliances or pipes.
At the minimum, you should aim to drive by the home and take a look around the property. If you can get close enough, take a peek in the window too! This can give you some idea of the home’s condition and what you might be getting yourself into before you bid!
You should also research the neighborhood and find out what other homes in the area are selling for. This can save you from overbidding and spending too much money on the house. One easy way to estimate property value is to use an online estimation tool. Alternatively, you could seek the advice of a local experienced real estate agent who will be able to advise you. All of the information above is how to buy a house at an auction.