I have been to auctions in the past where is was difficult to get an average deal. All of the market values is checked in the auction catalog were inflated by $100,000 to $200,000. With the buyers premium of 5% added to the closing price and the environment of the auction, it is my impression that most folks will probably pay more for the home at auction than they would if they tried to purchase during a short sale or as an REO. Antoher benefit of short sale or REO's are that the buyer has additional time to inspect/evaluate the property. The due diligence time reduces the buyers risk. Since the buyer is taking on additional risk at the auction there should be a monetary compensation in a reduced price - which never seems to materialize. Another thought is that there will be others in the crowd that may or may not have properly evaluated the subject property and they bid up the home. So I feel that the frenzy that takes place during real estate auction will only benefit the banks and the very sophisticated real estate investor.
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