Whether it's your first time or if you have plenty of experience, buying a house at auction can be a complex experience. It is very different from purchasing a home through traditional methods. Educating yourself on the ins and outs of buying is essential so you are aware of the potential risks and pitfalls. Read ahead for some more information on what to expect.
What to Expect at Auction
Homes can end up at auction for various reasons: bank foreclosures, government seizure, the homeowners association taking possession of property, or the seller could be highly motivated either on their own or on behalf of a deceased property owner. This can be an excellent opportunity to get a piece of investment property below market value.
Real estate auctions begin like any other house sale: with a listing. However, the listing will go up weeks in advance. This usually generates "buzz" around the listing and creates excitement. Letting buyers know in advance that a property will soon be up for grabs means people are getting ready, as should you. You might be required to register to attend the bidding and stay updated with property information.
You are not going to have access to an agent, as you would with traditionally buying a home. You will need an agent who can guide you through the process.
Finances are also handled differently. You're most likely going to need cash for the entire property. More on that below.
Inspection
Generally, you want to be aware of what you are buying. After all, you're putting a significant amount of money toward this investment opportunity and'll want to ensure it is worth it. However, auction properties rarely allow potential buyers the same level of access as traditionally sold properties. You will likely need an agent to inspect the property. Although there are exceptions to the rule
You can undoubtedly drive by the property or even walk around the outside of it. But, usually, you won't be able to see the inside.
If you're worried about the home's condition or can't risk buying a property in poor condition, ensure you're attending biddings that allow you to inspect the house before purchase physically. With a prior inspection, it can be easier to know what you might be getting into, what repair costs might be, and the actual value.
Preparing Financially
In most cases, only cash offers will be accepted. That means you can't finance the house. Occasionally, some auctions will provide enough time to secure a mortgage, but this will vary depending on the county and province you're looking to buy in.
If you are allowed to mortgage, bring your preapproval letter. You'll also need cash for a deposit or down payment. All of this must be established and collected well before bidding. Make sure to factor in any additional fees for your preapproval amount; that way, they won't eat into your maximum bid amount.
Putting it All Together
You've registered, inspected the property to the best of your abilities, and have your finances in order. It's time to bid. Each auctioneer will have their bidding process, so research yours. They should have a website for details on the bidding process. Bidding can take place live or online and are usually open or blind. Open auctions allow you to see the amount of the other bids, while blind means you cannot. If you win the bid, be prepared to pay either immediately or within the next day or two. Congratulations, the property is yours.
Like anything, significant risks are involved with buying a house at auction. It is crucial to be aware of them to make an informed and educated decision. But, it is an exciting adventure and a worthy step to start building wealth. If you have concerns or want some direction, we're here to help. To speak with industry professionals about investment properties, mitigating risk, or growing your investment portfolio, visit www.RegalwayHomes.com and book an appointment with us.