Buying Real Estate at Auction
Whether you’re buying your first home or your a veteran investor,
1. Do your own research and be prepared to buy well in advance of the auction date.
The days prior to the auction are the best time to ask questions of the auction company about the process and inquire about questions relative to the taxes, zoning, uses, etc. Most auctions do not allow the provision for contingencies, which means you need to be prepared to buy and close on the property if you’re the winning bidder and deemed the buyer on auction day. Make sure to attend open houses of the home or building you are interested in, and determine what you can afford to spend. The actual auction process is the fun and exciting part; it is the reward of your research and diligence because a prepared buyer knows what he or she can spend on the property and is prepared to own it.
The best part of the auction process is that the final sale price is a perfect appraisal. We call it true value: the point at which a quorum of buyers compete for the highest price for the property. The winning buyer leaves the auction knowing he or she could not have bought it for less, and the back up bidder leaves knowing he or she could have spent another $1000 and could have bought the property.