Buying real estate at auction
Buying real estate at auction
Real estate at auction? That’s only for foreclosures and bankruptcies, right? Well, sometimes. Sometimes it’s just a savvy, motivated seller who wants to move a property quickly, or perhaps take advantage of competition to achieve maximum market value. Whatever the reason, auction might be the best way for you to buy a property too.
As a bidder and buyer here are three things that you need to know.
1. Most properties are sold “without contingency”. This means that after your bid is accepted, you won’t be able to go back and negotiate over flaws in the property. You won’t be able to back out of the purchase if you can’t get favorable financing. There is no re-negotiating and your bid is binding.
So, this means you must do your due diligence before you bid. Arrange your financing ahead of time. Review all of the property information and disclosures carefully and perhaps invest in a property inspection. If you’re serious about the property, it's a minor investment.
2. Financing is available. Though it may be a little harder to obtain, it’s still available. You might need to have an appraisal done before you bid, so the lender knows what they can loan. You might have to adjust your bidding when you learn what your lender is, and is not willing to loan. They can certainly help you set your limits.
If you’re thinking about a loan for an auction, it’s worth a conversation with the auctioneer. Likely they have connections with lenders that they have used in the past or know of someone willing to work with non-conventional loans.
3. Do your research and set your bidding limits. Whether you’re buying a single family home or a large commercial project, you must do your homework first. What are the market comparables (comps)? What will your finances allow? What’s your absolute top limit on bidding?
It’s easy to get caught up in the excitement and adrenaline of an auction. There’s an element of competition and winning is always in the mind of a bidder. It’s ok to fight for what you want, but know your limits. You need to stop when the logic says you’ve bid enough. If you are financing the purchase, your lender will likely tell you what your limit is. If you go over, you’ll probably be paying the overage out of your pocket.
If you know what you want, do your homework up front, and set reasonable limits, you could end up with a great property at a fair price. If you’d like to learn more, call us here at the Schur Success Group (719) 667-1000. We’d be happy to answer your questions. After all, we’re award winning Master Auctioneers!
