Be Prepared: Getting Pre-Approved for a Loan before Attending a Real Estate AuctionNovember 8th, 2010 by PA - Bloger
With the real estate market being so unpredictable, real estate auctions remain an attractive and popular option for both sellers and buyers. Commercial and residential properties alike are being auctioned by various real estate professionals, and many investors see auctions as a golden opportunity to get the most bang for their buck. According to the National Auctioneers Association, $58.6 billion in commercial and residential real estate was sold at auction last year, and predicts that nearly a third of all real estate will be sold at auction by 2013.
In order to be a contender at an auction, potential bidders and buyers must be sure to have the required financing. Once your bid is accepted, it’s a done deal. So if you’re serious about purchasing at a real estate auction, be prepared. You must be pre-approved – not pre-qualified – for a loan. Pre-approvals are more detailed and require more documented information. The typical process would be to fill out an application with a bank or other financial institution for the highest amount you would be willing to spend on the property. You will be required to provide various documents including bank statements, W-2 forms, proof of IRAs or retirement accounts, most recent pay stubs, etc. Your credit report would also be checked during this process, and sometimes an application fee is involved depending on the institution. Upon completion and approval, you should receive a good faith estimate (GFE) which basically explains the terms of the loan, including the interest rate and loan type. When attending an auction, you would bring the pre-approval letter along with 5-10% earnest money of the possible purchase price.
Auctions continue to be a driving force in the real estate market – just check out the listings. From Fisher Auction Company’s November 30th auction of 10 properties throughout Miami/Dade/Broward Counties in Florida to United Country’s December 9th auction of a 154-acre mountaintop estate in Maricopa, Arizona, properties in both commercial and residential listings are being capitalized on nationwide – all through real estate auctions.
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