5 Things Buyers Need To Know About Real Estate Auctions
In today's real estate economy many homes are being auctioned off on the courthouse steps. These aren't the complete auction story and buyers may want to consider purchasing a home at auction as a viable means. Distressed properties may be the first thought of most buyers but professional run auctions are gaining in popularity by home sellers wanting a quick and clean sale.
Residential real estate auctions grew by almost 48% between 2003 and 2008, from the most current data from the National Auctioneers Assoc. They are fast becoming more mainstream. The traditional method of selling a farm is by auction in the U.S. and in Australia and parts of Europe the standard method for selling a home is by auction. The auction method is gaining popularity here in the U.S. as more and more sellers are beginning to think out of the box when it comes to selling their homes.
To quote Chris Longly, deputy executive director of the auctioneers trade group. "Today's consumers want things now and they want to pay the price they want now."
Here are the 5 things buyers should know about real estate auctions;
1) Buyers need to understand there is a difference between a "Sheriff's Auction" for foreclosures and a professional run auction on a non-distressed property. The sheriff sale is a legal proceeding where the lenders are foreclosing on a delinquent mortgage and are usually bought back by the lender for the value of the mortgage owed on the property.
2) In a foreclosure auction buyers are usually unable to view the properties on the inside, no open house will be done. The lender who is foreclosing isn't the legal owner and doesn't have the right to let people inside the home. This puts a much higher risk to the purchase by an individual.
3) A professional run auction will permit home buyers to involve their real estate agent, who will usually receive a commission on the sale. The Realtor is able to advise the buyer on property condition, property value, and neighborhood stability. The auction will have an information packet at the open house that include the legal required disclosures and a copy of the contract the high bidder will sign. The Realtor can explain and help with these forms and contracts.
4) The buyer should attend the open house and view the property and determine how much they are willing to pay for the property. Before the sale begins the auction house will require bidders to present certified funds or a cashiers check for the designated amount put forth in the terms of the packet which will be several thousand dollars. If you don't have this you will not be allowed to bid.
5) The sale price may not be the whole price, however. There are usually buyer premiums paid by the buyer to pay commissions, legal title work and other costs. Typically the property will close in 30 days or less and possession is giving on funding. It's important the buyer gets pre approval to get their mortgage before the auction in order to meet the deadlines and the terms of the buyers agreement. This is why, in my opinion as buyer you should hire a Realtor to help you through the process.
Happy Trails
DK
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