Here are the Top 5 Most Frequently Asked Questions by Auction Buyers:
- Can I get a good deal at a real estate auction?
The answer is yes, but consider these points..
- Do your due diligence.
Just like a traditional real estate purchase, you must do your due diligence. Since most contracts at auction are "as is", "where is" with a "30 day close", you must be prepared before you bid. Many auctioneers provide a Property Information Package which contains a great deal of information about the property (demographics, environmental information, tax information and other salient facts). The Property Information Package is usually available at the auctioneer's website or by request. (see our blog post - You Can Be Just as Diligent Online as In Person)
- Inspect the property.
Auctioneers typically offer inspections for real estate offered at auction. Inspections can be by appointment or at specific scheduled times. This information is usually found on the auctioneer's website and/or property information package.
- So, can I get a good deal at auction?
The answer is most definitely YES. Prepare yourself with doing your due diligence which includes the highest price you are willing to pay for that asset. Don't forget to take into account the additional fees. Once you come to that number, don't get emotional. Remember, when you are buying at auction you are usually buying the property "as is", "where is" with no contingencies. Meaning, the sale is final.
- What kinds of properties can I purchase at auction?
What is the difference between a LIVE and an ON LINE auction?
- Any type of real estate is available at auction throughout the year. You can find residential homes, residential land and condos for auction. On the commercial auction side you would be able to find properties such as office buildings, warehouses, industrial properties and apartment buildings for auction.
Live auctions are typically held on site at the property location, in a ballroom or at a courthouse. Potential bidders gather at the live auction site and bid by raising their hand or bidder card. If they are the winner and become the purchaser, they are typically asked to sign the purchase contract on the spot. An online auction takes place virtually. Bidders register at the auctioneer's website or designated third-party bidding website and place bids via the Internet. Typically bidders submit their earnest money deposits required to bid with the auctioneer before being allowed to bid online. ( learn more about the three main types of real estate auctions )
What is the responsibility of the buyer?
In an auction situation, the buyer is responsible to purchase the property:
(See our blog post - Understanding the Real Estate Auction Contract)
- In "as is", "where is" condition;
- Without any contingencies including financing; and
- close within 30 days
Now break that down:
As is where is -
The buyer is agreeing to buy the property as it is, which could mean accepting the property with a broken garage door or a major environmental issue.
For example the buyer cannot have a mortgage contingency, they must have all the funds and be ready to close within 30 days.
30 Day Close
Most auction contracts must close within 30 days of the auction date. Buyers who cannot close would be in jeopardy of losing any deposits + be subject to additional damages depending on the contract. In most cases the seller (not the buyer) has the right to extend the closing time period. (See our blog post titled: Be Prepared: Getting Pre-Approved for a Loan before Attending a Real Estate Auction)
What happens if I cannot close?
The auction contract, which is usually made available prior to the auction, should spell out all of your obligations. If you do not close , you would at the very least be in jeopardy of losing your deposit and also possibly be liable for additional damages. The important idea to take away is don't bid if you aren't prepared to buy.
Now how do I find some real estate at auction?