Well, about a month ago my client and I started on the journey of bidding on an auction property. We ended up getting the bid accepted, we went through the long process of obtaining an FHA loan and we have finally reached our end! I am happy to say that we made it and it wasn't that bad.
No, really the auction process was fine and we were very pleased with the people assigned to handle our account at the auction company. The MAIN problem we encountered was in underwriting. I want to share this with all buyers and agents out there so you don't run into the same problem.
The auction company had a Buyer's Premium Fee tacked onto the purchase price. We knew this before we placed a bid. We factored that into our offer. The first page of the purchase contract breaks down the fees: Total Purchase price= $
Buyer's Premium = $
Closing Costs paid by Seller = $
So, these fees are all disclosed on page 1 of the purchase contract where everyone is aware and agrees at the beginning. We ended up getting 4 days from closing when the underwriter states that the buyer's premium fee is not a fee that can be financed. What??? Why wouldn't we have been told this upfront? After getting an addendum from the auction company re-wording it (the way the underwriter wanted us to), the underwriter comes back and says it still won't work. Long story short, the buyer had to come in with that premium fee (5% of purchase price) on top of his down payment and some closing costs that the 3% we had asked for from the seller didn't cover. It worked out in the end, but was hard to come up with the money at the last minute.
So, for anyone buying an auction property, just a heads up that you will most likely need to bring in the buyer's premium fee at the end.