This is a good question, but the answer will not be short. I can tell you from my experience. I have just been through this with my clients yesterday. This topic will take a 90-minute session to barely help you start investing in Auctions.
A short answer is NO! unless you are a wealthy investor who has millions in cash to spend and a lot of time to kill.
Few factors an investor should watch out for:
(1) Cash or Cashier's Check
These are the only two payments in auction. If you need a mortgage to buy a property, don't think about Auction!!
(2) Property Details and Condition
The information of properties on Auction requires Bidders' verification. Auction properties are sold "AS IS, WHERE IS, WITH ALL FAULTS AND LIMITATIONS" and all sales are "FINAL". If you don't know the property details before you go into the auction, chances are you will not be able to verify it in Auction.
(3) Minimum Bid and Auction Location
Auction Location is readily available, but you need to know someone in title company to get it for low cost. Often the minimum bid is not revealed till the day before auction. Auction is on Friday, and the minimum bid may not be available till Thursday afternoon.
(4) What really do you Bid for?
Bidders are encouraged to investigate the existence, priority, and size of outstanding liens that may exist on a property. Placing the highest bid at an auction does not automatically entitle you to free and clear ownership of property. You should be aware that the lien being auctioned off may be a junior lien. If you are the highest bidder at the auction, you are or may be responsible for paying off all liens senior to the property.
(5) Last Minute Cancel or Postponement
Many foreclosing properties are under short sale negotiation now. If the listing agent has an offer, chances are the foreclosure auction is postponed or removed the day before, that is, Thursday before the auction day. Thus, even if you have find out all about the property and know you are buying the right one at the best price, it may not be available to you eventually.
Last but not lease, you do not obtain a warranty deed through an auction. You will not have the seller purchase you a "title insurance" and help you deal with any title issues when the property is in your name. If there is no immediate lien concerning you like I talked about in item 4, you may be concerned when anything happened during your ownership.
Good luck for your real estate investment and let me know if this is making any sense. I would be happy to walk through this in more detail. Give me a call @ (206) 604-2755
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