Come With Cash To A House Auction
Once youve identified some properties with possibility, its time to get your cash ready. Each auction place, whether online or in-person, has its own rules and regulations, but generally speaking, you can expect to have to put down a chunk of change upfront.
Youll likely be required to pay a deposit of 5% to 10% of a homes projected value just to bid on it, says Mizes. While the deposit is refundable, if you plan on bidding on more than one home, that adds up quickly.
Then if you win an auction, youll probably have to pay for the home in full with cash or cashiers check. Often you have to do this immediately or you have a short time span to do so. If you fail to pay in full, you can lose your deposit along with the property and face a ban from future auctions.
Additionally, you may be hit with fees. Property auctions involve more players than just the bidders and a bank, and these other people all have to be paid. Typically their fees fall to you, including the charge from the venue hosting the auction, attorneys and other entities involved with bringing the property to auction.
Summary: Auctions Are Best Left To The Investor Set
I know how tempting a bargain is, but buying a home at auction is generally a pretty risky endeavor. The good news is that there are lots of other ways to buy foreclosure properties. Contact a real estate agent in your area and discuss what youre looking for. Theyll be able to guide you away from pitfalls and into your new home.
In the meantime, learn more about buying your next home in our Learning Center.
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Tips For Real Estate Auction Success
Auctions can be stressful, but here are some tips to help you keep your cool:
- Cast a wide net: Don’t limit yourself to the first auction you find there are many potential auction sources. Use a service such as ForeclosureRadar or Auction.com to locate homes for sale at auctions from a wide range of sources near you.
- Research each property beforehand: You can’t inspect each property, but you can still get creative with your research to find out more about it, such as from old Zillow or MLS listings, title searches, and other sources. Don’t just show up at the auction to bid on random property.
- Have a walk-away price for each property: Know what your maximum price is for each property you expect to bid on. This will help you keep your emotions from signing you up for a larger purchase than you intended.
- Research how auctions work in your area: Each auction works differently, and each location has its own rules for how auctions work. Attend auctions before you plan to bid to see how they work, and know exactly what happens after you buy.
- Know what youre bidding on: With a foreclosure auction, you are not bidding on the property, but on a lien, said Peterson. Being the highest bidder does not guarantee you free and clear ownership of the property. Research the property with a title company to verify the nature of any liens or other issues. And if its a rental, be prepared to make a Cash for Keys offer to help the tenant move out and find a new place.
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How Do Auctions Work
There are a variety of different auction houses, and every one of them has their own rules. Even within one auction house, there may be a variety of auctions being offered. They must also conform to the rules of the state and municipalities in which they are located. Make sure you understand the rules of the specific auction youre interested in before you bid.
You Should Never Buy A House At Auction If You
have a very specific vision regarding what your future home should look, feel, and smell like . If you have some very particular, intractable ideas about what you want and need, skip the auction.
Picky buyers may find themselves stranded in a sea of not-quite-right listings at an auction house. You have to be willing to accept that you might not get the four-bedroom ranch of your real estate dreams. The kitchen probably wont have an open layout. You might have to prepare for wood paneling.
Thomas had only three requirements: I wanted a home at a discount, I did not want to fight for it, and it should have a view, she says. I got all three of these things.
No, Thomas didnt get quite everything she asked for. Her auction home is located on a lake, but a previous owner had installed a bedroom closet that blocked what should have been a stunning view.
I joked that the closet had a lake view, she says. To fix it, she changed the homes layout to make room for a window.
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Finding Real Estate Auctions
One way to find auctions is by contacting local governments directly or visiting their websites for information and then following up by phone to confirm the details. Another is through sites such as RealtyTrac.com and Auction.com. However, online information is not always accurate.
Properties may be listed that are in pre-foreclosure, because the owner is behind on payments. These properties may never go up for sale because their owners catch up on payments or come to an arrangement with their lenders.
Local real estate agents and brokers can also be valuable resources. Unfortunately, you may not find them eager to help, because agents and brokers do not automatically earn commissions on live auctions. However, these realtors can earn commissions through online auctions.
Multiple Listing Service Data
Direct multiple listing service reports are far more valuable to potential buyers than online listings, according to White, because they contain the full data for the listing, including photos and, most important, nonpublic broker comments. Non-public comments are important because they specify critical information impacting sale price and days-on-market, says White. This information can cover property defects, financing options, occupancy, and tenant leases.
The best way to assess an auction property is to work with real estate agents, appraisers, and contractors. These industry representatives understand construction and remodeling costs and can accurately estimate the propertys value and the cost of the work it may need.
While rules vary by location, MLS and county records are often only available to real estate licensees, according to White. In his experience, they are usually happy to help free of charge if you contact them.
White also notes that in-person auctions have been disappearing because even smaller counties have been moving them online. Miami and Palm Beach are two locations where both tax and foreclosure auctions are now fully online.
Keep in mind that foreclosure auctions are often postponed or canceled, even at the last minute. The lender might not have obtained all the paperwork it needs, or the borrower may have worked out a solution to avoid foreclosure.
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How Does A Real Estate Auction Work In Australia
A real estate auction involves public bidding for a property wherein that property is sold to the highest bidder. Its a public trading event that is subject to strict rules, and typically carried out by a real estate agent, who acts as an auctioneer.
For first home buyers, usually involves registering for the auction, bidding for the property and signing the contract of sale.
On the auction day, the terms and conditions of the contract are typically on display on the location for the auction participants to have a final look at them. Once they start bidding on the property, theyve practically accepted the terms of the contract and there is usually no further room for renegotiation.
Get Your Minimum Deposit Ready
At the end of the auction, the successful bidder is promptly required to sign and exchange the contract of sale, and also pay a 10% of the property price as a deposit.
But before the fall of the hammer, it is quite impossible to predict the exact property value.
So, if youre serious about bidding at an auction, you need to secure enough funds for the deposit. And, by enough, we mean more than 10% of the average median house price around the auction area.
The seller may agree to a partial-deposit, usually 5%, but thats very rare, and needs a change in the contract of sale, which most sellers dont normally prefer to do.
So, the only sure-shot way of securing your first home after winning an auction is to be able to make the deposit required by the contract.
You can make the deposit at an auction by:
- Personal or bank cheque.
- Electronic funds transfer , if permitted by the seller, followed by an email confirmation to the auctioneer and the seller.
- Deposit bonds But not all sellers will accept a deposit bond so you will have to confirm with the auctioneer about that.
- Cold hard cash, which is what many sellers and agents prefer.
You may want to have a conversation regarding this with the solicitor or the agent of the seller prior to the auction day.
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How Home Auctions Work
When a homeowner misses several months of mortgage payments, the bank or other lender can place the property under foreclosure and move to get the tenants evicted. It then places the home in a foreclosure auction, which is held by bank-hired trustees. The lender hopes to recoup what is still owed on the mortgage, but often gets less. It isnt allowed to get more or profit from the auction.
In other cases, a homeowner can fail to pay property taxes for many years. So local tax authorities take control of the property and place it in a tax lien auction. These are held by governmental authorities.
Each of these can break down into two other types of auctions. In a confirmation auction, the lender has the choice to accept or not accept the winning bid . In an absolute auction, the highest bidder wins the property. But before going through with a home auction, make sure you consult your fiduciary financial advisor, as there are risks involved.
Know Who Youre Bidding Against
Auctions can be prime opportunities for scoring a deal on a house because fewer people are competing for a property. But be forewarned: this competition is fierce. These auctions dont attract just first-time homebuyers. Youll also likely be in the bidding room with experienced real estate investors and other professionals in the housing industry.
Those who attend home auctions are extremely well informed, explains Ben Mizes, a licensed Realtor and real estate investor . They know the area and whats driving profits on real estate investments. Of course, new investors should give home auctions a try, but you need to understand who youre bidding against.
One way to get ahead of the competition is to research the real estate market in that area. Look into how much homes are selling for in the locality to determine where you should draw the line in terms of what you bid. A Realtor can help here.
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How Does Purchasing A Property At Auction Differ From An Open Market
When purchasing a property at auction, you ideally must have the funds in place prior to placing a bid, or if using finance, then you will need a mortgage in principle. This is because once the hammer falls you are locked into a purchase contract that is legally binding. There is a specific timescale, based on whether it is a conditional or unconditional mortgage, and the full finance amount must be available by this deadline.
Why Do Properties End Up At Auction
There are numerous reasons that a property may end up at auction but one of the most alluring features of selling this way is the fast turnaround it brings. Often, it means that a property will sell for less than those advertised via an estate agent which is why purchasing in this manner is an appealing prospect to many. Reasons a property may be auctioned are:
- In a state of disrepair
If you require a mortgage to buy a property, it is important to gather all the facts before you go to auction, as some of these reasons will mean it can only be purchased outright so it is important you are sure that finance can be secured on any property you bid on.
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Buying Houses At Auction
One of the questions home buyers often ask is how do real estate auctions work? The question is often asked because they want to know how to buy a house at auction.
Buying a home at auction offers an exciting alternative to the traditional route one that can be perfect for those who want to invest in real estate.
With both live auctions and online auctions, the opportunities for finding a promising investment have never been better.
Without a doubt, most people conjure up images in their minds of getting the deal of the century at an auction. While there is certainly the possibility of that happening, it is not always the case.
Of course, making a significant investment mistake is also possible, so it is essential to ensure you are prepared for the auction process.
Fortunately, it is easy to learn and approachable for just about anyone, as long as you move carefully and seek knowledgeable guidance when you need it.
The possibility of finding a solid long-term real estate investment from buying a house at an auction is pretty good.
Be sure, however, that before jumping in, you have a handle on how the auction process works. By the time youre done reading, youll have a great handle, potentially finding a good deal on buying an auction property.
What Are You Buying
Your property depends on your objectives and resources.
For long-term investment, you’re concerned with rental potential or livability for yourself. Your concerns include long-term price appreciation, annual rental income, and the availability of tenants. Or how much it will cost to make the home a comfortable dwelling and a good investment for you.
Flippers look for underpriced houses in poor condition. A home’s size, condition, and geography also affect its potential short-term income.
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Why Buy A House At Auction
There are many benefits to buying a house at auction. Most people pursue this option because there is the potential of finding a really great deal. You could find a nice home at a steep discount.
And when you buy a home at auction, youll face far less competition than you would by taking the traditional home buying route. However, you will likely be going up against experienced investors.
And there are risks to buying a home at auction. Youll have limited knowledge about the property before buying it, so you may end up with problems you didnt anticipate. So, its important to go into the auction well-informed so you dont end up investing in a money pit.
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Get Your Bid Together
Most home auctions operate in cash, meaning you cant buy a house with a mortgage, though one exception to that rule is a HUD auction. Remember, though, says Monzo, These are typically distressed homes that dont have utilities turned on, so even if the auction allows mortgages, a lot of the time the mortgages cant close because of the condition of the home.
So, in nearly all cases, youll need to get your cash in order before the auction takes place. Its also not usually enough just to have the funds available you often have to prove that you have the financial means to bid on a house before you can register for an auction, so make sure you have proof of funds or some other documentation.
At a courthouse auction, for example, Monzo says you must have a cashiers check for the full asking price of the home. If you end up bidding over the asking price, the additional funds are due almost immediately, normally by the end of the day.
Youll also need your earnest money available after the auction, should you be lucky enough to be the highest bidder.
How To Get A Mortgage For An Auction Property
Purchasing a property via auction is a great way to grab a bargain home or buy a property swiftly. Historically, auction purchases are made by cash buyers or investors but these days they can be a popular choice for a variety of people including those buying a property with a mortgage.
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