For those in search of a home or condos for sale and a bargain on one at that, a different way of buying a home may have caught your attention. Home auctions are nothing new, and they seem to present buyers with a way to purchase a home for far less than the local market provides. If you are considering bidding on one of these "bargains," you should do your research and know what you may be getting yourself into. Read on to learn how these home auctions work and what to beware of.
Why auction a home?
These homes are usually foreclosures, where the previous owners failed to pay their mortgages. Lenders, who are in the business of money lending and not real estate, don't want to deal with these homes, so they are either sold off to auction companies or contracted out to them to auction. This presents the quickest, easiest, and least expensive way to get money for the bad loans for the lenders.
Do your research
Buying a home at auction is different than buying the traditional way, and it makes sense to read all accompanying information about not just the home you are interested in, but in the many rules and regulations that auction companies have. As to the home itself, you may not be able to go inside the home at all; you may be resigned to peeking through windows and viewing photographs.
These homes are often picked up by "flippers," people who are in the business of purchasing run-down properties for pennies on the dollar and rehabbing them to sell for a profit. That means that "what you see is what you get" is pretty much the theme of these homes. Don't be too surprised to find that the home has been stripped of heating and cooling units, appliances, floor coverings, and more. If you are handy and plan to renovate, taking this risk when buying a home this way could present a bargain.
Have cash in hand
Be prepared with cash on the day of the auction. The deposit amount you will need will vary but is usually a certain percentage of the home's value. In most cases, you have only a limited amount of time to pay the rest of the cost of the home, so have your financing lined up beforehand or you could end up losing that deposit. Know about the buyer's premium as well, which is a service charge added on to the bill.
This way of buying a home can be tricky and may not be right for you. Be sure to discuss this and other real estate topics with an agent.