More and more of our buyers are asking about auctions; and they are certainly not something you go into without being armed with your Buyer's Agent (yours truley:) and some knowledge of the process. With the increasing popularity of real estate auctions,Â we
encourageÂ potential buyers to do their homework prior to getting in the
game. Auctions can be a fantastic way to get great deal if you know what youâ€™re
doing. WhetherÂ you are a RealtorÂ®, an investor who hasÂ bought zillion
of dollars in real estate or a first time home buyer, you still need to learn
the rules and tricks. Here are some examples of how not to bid and buy at auction.
Real estate auctions CAN be a great way to buy real
estate. To lower your risk and raise your gains, be sure to consider contact Janis O'Carroll email@example.com or cal me directly at 602-708-0818.
- Do not bid without inspecting the property
prior to the auction. A little description in a brochure
that you just picked up at the auction is not called due diligence.
Remember, if youâ€™re the winning bidder youâ€™ll be signing a non-contingent
contract. In other words the property is yours no matter if your financing
didnâ€™t come through or the place needs repair. You bought your property
AS-IS. Get ready for the closing.
- Know the true value. Some
auction brochures and ads can show theÂ previously listed price. Well,
that price could be the highest ever listed price, not necessarily the
recent or most realistic one. Do your homework and go online. Many
websites will provide you with recently closed listings of similar
properties. Otherwise how are you supposed to know if youâ€™re getting
theÂ deal of a lifetime?
- Plan, strategize and win.
So you found the property youâ€™re dying to get, now what? Think of it as a
battle. You most likely will have opponents (other bidders) in the room.
Create a strategy, define your maximum bid, and do not let your emotions
take over. This is a business not a race. There could be a chance that the
property bid exceeded the market value and you should take a pass. There
is always a new opportunity down the road.
- Let others start the bidding.
If no one bids itâ€™s even better because the seller might be open to lower
his reserve. I see people make offers lower than the reserve or minimum
bid after the auction. Some sellers are determined to sell and may accept
- Go auction hunting.
Instead of looking for properties at auction that are plastered all over
the radio, TV and billboards, try to find auctioneers with a smaller
marketing budget. That way youâ€™ll avoid the crowds and might get a better
deal. Believe or not, smaller local newspapers are a great source to find
these hidden gem auctions.
- Avoid dual agency. Find
your representation, itâ€™s free. This one is very important. There are some
auction companiesÂ that do not cooperate with RealtorsÂ®. In my opinion
that is a huge disservice to the seller theyâ€™re representing because
itÂ limits the buying pool. Try to avoid these auctions because the
auction RealtorÂ® is representing the seller and even thoughÂ dual
agency (representing the buyer and seller in the same transaction) is
legal in some states, your satisfaction as a buyer might not be their
priority. Instead, use the Internet to find a RealtorÂ® who knows auctions
and who will exclusively represent you as buyer. This service costs you
nothing, because your agent will get paid by the seller, and a real estate
agent can be very resourceful with helping you find financing and helping
you do the due diligence.
- Watch out for â€œdummy biddersâ€ and
auctioneers that â€œpullâ€ bids from walls. Sometimes
auctioneers do that to raise bids so they reach the reserve price. Itâ€™s
unfortunate that it happens.Â Iâ€™ve witnessed sellers accepting
contracts under their set reserve price. My advice: make sure youâ€™re
bidding against real people. Look around.
- Donâ€™t forget about the buyerâ€™s premium.
Always read the auction terms and conditions. The amount of buyerâ€™s premium
should be listedÂ there. Buyerâ€™s premium is an additional fee on the
top of the sales price that youâ€™ll have to pay. Letâ€™s say it is 5% of the
winning sales price and you won a condo for $100,000.Â Do the math.
5% of $100K = $5K. Therefore, your total price will be $105K (the $100K
winning sales price plus the $5KÂ buyerâ€™s premium).