If you are in the market for a home, whether for investment purposes or as a primary residence, housing auctions may be a great way to find what you are looking for and save money in the process. In the past, it has seemed like housing auctions were the domain of serious, experienced investors.
Thanks to technology and the availability of information via the internet, anyone can take advantage of this money-saving route to property ownership. Still, if you want to take advantage of this opportunity, you will need to do your homework and get yourself ready.
How Can Housing Auctions Save You Money?
Investors are drawn to housing auctions for the money they can save over the traditional home-buying method. The reason for potential savings has to do with the
source of the homes available at auction.
Most homes on the auction block are foreclosures. In this situation, the lender typically tries to recover the unpaid balance of
a home loan in default. This means that they want to sell quickly and are willing to take less than the typical market price.
In-Person and Online Auctions
There are now two options for participating in housing auctions, in-person and online. Traditional, in-person auctions are held at a specific time and place. Online housing auctions are virtual and may take place over a more extended period.
During the pandemic, some auctions experimented with online remote bidding at live, in-person auctions. This enabled more people to participate while dealing with social distancing requirements. It will be interesting to see if this option will remain available after the
pandemic is over.
How to Prepare for Bidding on Homes at Housing Auctions
Whether you are bidding at an in-person or online auction, you will need to do some upfront work to be prepared. Keep in mind, things can move pretty fast in an auction setting.
Also, unlike most traditional home buyers, you won’t necessarily have the assistance of a real estate agent or broker. Being knowledgeable and prepared is the
best way to get the most out of your auction. It may also keep you from running into problems down the line.
Here are some steps to take as you prepare for your first foreclosure auction:
Find a Property
The first step is looking for and finding a property that you are interested in buying. Since most of the homes available at auction are foreclosures, foreclosure listings can be an excellent place to start. There are several places to begin your search.
Several government agencies such as the U.S. Department of Treasury and Housing and Urban Development (HUD) maintain listings of foreclosed properties with information about auctions.
Many private auctioneering companies also offer listings of upcoming auctions and available properties. In addition, there are a growing number of online real estate
auction sites that provide information about properties available through virtual events.
Research
Once you find a property you are interested in, you will want to do as much research as possible before you get ready to bid. This will ensure that you know what you are getting and are sure you are paying a fair price. The point of buying at an auction is to save money, so you will want to be sure that you are not paying too much or purchasing something with many hidden costs.
You will want to thoroughly research the real value of the property as well as the cost to pay off any existing mortgage or liens. If this is your first time, it may be crucial to seek advice from a real estate agent, broker, or real estate attorney. Paying a little bit of money for some advice could save you a lot in the long run.
Financing
When you buy a house at auction, you are likely to be expected to pay all or a certain percentage of the price right away. Most auction houses accept cash, bank money orders, or cashier’s checks. If you are paying cash, be sure you understand when and how you will be expected to pay. If you plan on financing, you are going to need to do even more work upfront.
Once you win a bid at auction, you are committed to the sale. That means you need to be absolutely sure of your financing. Be sure that you are pre-approved for a loan. That is different from being pre-qualified. Pre-approval is a far more in-depth process and shows that the bank is ready to give you the money.
Also, be sure you get pre-approval for the highest bid you are willing to make, plus a cushion to cover any included fees. Make sure you understand the deposit policies. Some auctions require 5% or more down immediately, even if you are financing.
Double Check the Housing Auction Details
Before the auction, be sure you understand everything required to participate and know that every auction may be different. You will also want to stay updated on the property you are interested in.
Homes tend to move off the auction block for many reasons, including the owner finding a way to pay off the loan, arranging alternate financing, or selling the home privately.
Attend Auctions and Bid
All that is left is to attend either in person or online and bid. If you win with the highest bid in the auction, be sure to fill out and submit all the required paperwork and hand over your payment in time. The time period allowed for payment is usually very short so have this sorted before the auction. Most house auctions will ask to verify your funds prior to the sale.
Video: Foreclosure Auction Tips
Something important to take away from this video: “Just because it’s a foreclosure, doesn’t mean it’s a good deal.” Be sure to perform your due diligence and understand that buying foreclosed houses and other properties at real estate auctions comes with risk.
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Last updated on August 19th, 2023 at 08:13 am