If you’re on the market for a home, an auction can seem like an exciting way to go, and if you do your homework, it can pay off. First off, it’s important to know for a home to reach the auction stage, a homeowner has to have defaulted on mortgage and/or taxes for months, and also failed to renegotiate their loan.
Here’s what you should know before purchasing a property at a real estate auction:
Live auctions can be held in a county courthouse, or any public location, such as on the property itself. You’re required to show up in person to bid. They’re open to all, but you mustregister in advance and demonstrate that you have the financial means to make the purchase.
Be sure to research the auction beforehand, because they each have their own set of rules. Searching properties before you attendan auctionis also smart, because finding great deals can require attending multipleauctions. A realtor can help, although be aware that agents are not allowed to make commission on live auction sales. Since you may inherit any outstanding liens if you buy the home, it’s also a good idea to have an attorney look into thatpossibility.
Payment-wise, expect to have to pay in full immediately post auction. County foreclosure auctions often require 5% to 10% advance deposits as well. Remember: until you have the certificate of title, the owner could pay off the loan or file an objection to sale, and it’s still possible to lose the property. So wait for the title before you celebrate your new home!
Increasingly, buyers are opting for online auctions because they’re more convenient. You can bid on a variety of properties over a set periodof days or weeks. But this does not mean you can avoid your real estate homework if you want to get the best deal on a new property.
Like live auctions, you have to register beforehand, and most online auctions require a refundable deposit. The site will want to quickly access your funds once you win—typically 5% of the purchase price of the home must be deposited, so be ready for that.
Online auctions make it easier for you to learn about properties, so acquaint yourself. Hiring a realtor to do a title search may be wise, and they’re allowed to make a commission with online auctions, so that helps! Also consider getting . If you do end up winning a property with liens, title insurance will protect you.
There’s just one real rule to remember once you hit the auction: stick to your budget! Although it can be tempting to bid a little beyond what you can afford, there will be other houses, and you don’t have to compromise your financial situation to find one that works for you!