Bidding in a real estate auction demands preparation and patience on the part of the possible buyer. Together with any lien are other numerous other bidders, eager to land a good deal and walk off with a new home, investment property, business or part of property. Every auction is exceptional, but some general principles and caveats apply to all.
Have Cash In Hand
Real estate auctions nearly always need potential bidders to register either in person or online. At the auction, the registered bidder must present a cashier’s check for a predetermined amount, usually between $5,000 and $10,000. The check is typically written to the bidder. The winning bidder must pay a 5 percent deposit on the final purchase price, as well as a 5 percent commission.
Do Your Homework
After you’ve decided you are going to have the cash or cashier’s check in hand and before you venture out to the auctions, do your research about the properties. Learn what’s owed on every and if any liens have been placed against them. Read thoroughly any materials or information supplied by the county or the auction business. You may have the ability to learn all of this via a listing service. After you’ve subtracted any liens or tax burdens from the fair market value of the house, decide how much you’re willing or able to bid. Find a letter of pre-qualification or pre-approval if you’re going to need financing.
Know that the Auction
If you will be attending an auction which has a reserve, remember that even as the highest bidder, you can still shed the auction. In a reserve scenario, the bid can be rejected by the seller. If you’re bidding in an absolute auction, the high bid wins and the property is instantly sold.
Bidder Beware
When searching stocks for properties you might choose to purchase, start looking for those that welcome attorneys and real estate agents to accompany or represent their own buyers. Additionally, attend absolute auctions when possible, in order to avoid the reserve procedure, which places the seller in control. While bidding, be aware of other bidders who might be”shills,” or crops, set by the auction business. Shills function to bump up the price, inducing the purchase price to escalate.
Bottom Line
The main point in exercising strong auction approaches is to recognize when you’re purchasing the ideal property for the correct price. Be prepared to let the property go should you feel the price is too large, the reserve is too large, or the property has excessive liens and carrying costs.