“What do you think of buying at a real estate auction?”
***ANSWER:
There are different kinds of real estate auctions, including foreclosure sale auctions, probate auctions (called overbids), and auctions put on by private auction firms.
Were actually involved in one of the latter thats happening tomorrow.
Here are six things you should know in general about auctions:
#1: Most or all by private firms have a buyer premium, often 5%. So if your price is $500,000, add 5% to make it $525,000.
#2: Some have a reserve price. That means the seller may advertise starting bids at temptingly low prices. The only catch is you cant actually by them at those prices. Its a generally accepted practice. I think its misleading.
#3: In almost all auctions, if you dont close, you lose your deposit. So even if you cancel due to loan problems or defects you find in the home, you can kiss your deposit goodbye.
#4: In some, such as foreclosure sale auctions, you must pay all cash in the form of a cashiers check.
#5: In some cases you cannot view the property before you buy it.
#6: In some cases the property may be occupied. And if those occupants are the previous owner or anyone unhappy about the situation, youll have the fun and expense of evicting them.
Ive been a real estate investor for 20 years and Ive never bought a property at an auction. Ive bid before, but only after doing my due diligence and factoring in what I call the likely worst case.
More Information On Buying or Selling Investment Property
