I am thinking about buying a condo at an auction. Can someone tell me how this works and how to prepare?

Asked by Rgr, San Francisco, CA Fri Sep 5, 2008

I keep seeing announcements for real estate auctions. Most of them seem to be in the East Bay. Any thoughts on whether this is a good option, how the process works and how to prepare to make an informed decision? Can I use an agent for this process?

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Tisza Major-…, Agent, Upland, CA
Fri Sep 5, 2008
Hi Rgr,

I would second the opinion already offered. Basically a real estate auction works just like any other, you bid, others bid, you get excited and bid again, others get competitive and up the bid, you out bid them and the gavel comes down - bang! You win!

Or do you? There is usually a buyer's premium added to the purchase price which can be as much as 10 % of the final bid. You don't have the opportunity to do all the discovery you should do before you purchase a home and if you decide to walk away for any reason you stand to lose the deposit you paid, usually via cashier's check upfront.

They sure do seem like a great idea, but think about this for a minute... It's like an iPhone on eBay, they may list it for a penny and say that there is no reserve but there is no way on this earth that you are actually getting that item for one cent. Even if the seller is willing the other potential buyers are not.. The real estate market works the exact same way, the other people looking to purchase properties actually determine how much homes will sell for and how much they are worth.

My advice would be to get yourself a good, experienced Realtor and have them help you find a home you can purchase in a safer, saner and less volatile manner and for a much better price. Remember that hiring a Realtor to represent you as the buyer in the transaction doesn't cost you anything but not having one can cost you a bundle.

Good luck with your home purchase. It truly is a great time to buy!

Take care and have a great day!

Tisza Major-Posner, Realtor, IVPG Realty (909) 837-8922
Web Reference:  http://Route66Living.com
1 vote
Bill Eckler, Agent, Venice, FL
Fri Sep 5, 2008

Our advice is to contact the auction company or bank for the auction prodess procedures.

A word of caution: preview the property and set a high number limit before you even go to the auction...don't get caught up in the bidding process and pay more then necessary.

Good luck,
The "Eckler Team"
0 votes
Jason Chapin, , San Francisco, CA
Fri Sep 5, 2008
You can certainly use an agent, but I'm not sure if it makes sense. First, you'd have pay the agent's fee out of pocket. Second, I don't know whether an agent could gain access to homes any easier than you could. Having said that, an experienced agent who knows the area very well might be able to shed some kind of insight.

Auctions are tough. You'll be competing with experienced investors with strong capital and a staff of participants who will together try to bid others out of the game. I don't have personal experience with foreclosure auctions, but I have participated in tax auctions before.

You should pull tax and public records on each property you are interested in. You'll probably not be able to see the interior of the homes, but you should at least drive by. Look for major issues, like foundation or roof problems. Be sure, too, to stay on top of the auction's inventory list. Often times savvy investors will have already acquired the best properties.

You can also pick up books on the topic...

Good luck!
0 votes
Sj209, Both Buyer And Seller, California
Fri Sep 5, 2008
Most of the auctions are to be avoided. The only auction I would consider attending would be a builder's auction, government auction or trustee sale. That said, government auctions and trustee sales are generally for sophisticated risk-tolerant investors who have liquid assets. It's a big mistake going to any other type of auction besides the three types I mentioned if planning to purchase real estate. People overpay for many of the properties, the financing is terrible in many cases, sometimes properties are advertised as financing available but later the auctioneer changes the definition and the unlucky buyer is stuck without financing, you could be a high bidder and not receive the property (some sales are listed at "seller approval required"). Huge waste of time. I've never been, of course, but I've heard plenty of stories plus it just takes some common sense to know bidding against others will drive the prices up.
0 votes
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