Debunking The 4 Most Common Myths About Real Estate Auctions
Wednesday, March 28th, 2018
Auctions can seem fast-paced and complicated, especially if you have never been to one. You need to value the items, make bids, make sure you are aware of other bidders, and know close out procedures. Real estate auctions are some of the best ways to purchase real estate for the best price possible, but they can also be confusing to some. The following will go over four common myths about real estate auctions and how they are wrong.
1. You don’t see the real estate before bidding
Auctions on television or in movies are dramatic. The auctioneer displays the item and everyone is off into a bidding war. Because you cannot put a house on display at an auction house, it is commonly thought that you cannot see it before the sale. However, you do not just have to go off of a description to take part in a real estate auction. In reality, potential buyers are allotted more than enough time to look at the properties they plan to bid on.
2. Real estate auctions are rigged
It is tempting to assume the process is rigged, especially if you don’t understand how real estate auctions work. Some people believe that the company putting on the auction places employees in the audience to artificially drive up the price. This myth stems from a misconception about reserve pricing. Sellers often set a minimum floor value the property must reach before they will sell. This means that you can bid all you want, but if that threshold isn’t met, the seller doesn’t have to sell. To reach the reserve price, companies will bid until the price hits the threshold. After that, it is up to you if you want to buy it.
3. Real estate auctions are loaded with hidden fees
The only two fees you might encounter in a real estate auction are good faith deposits and buyer premiums, and both are never hidden. For certain high-value items, the auction company may require you to put down a good faith deposit. This deposit protects both parties, the buyer and the seller, to ensure that the transaction process is finalized. It incentivizes the buyer to finalize payment or forfeit the deposit, and obligates the seller to transfer the title to the property.
The buyer’s premium is a fee the auction house puts on the final bid process. This fee is always stated before the auction in the terms and conditions.
4. Only troubled properties are sold at real estate auctions
You can buy any type of house at a real estate auction, not just broken down homes. Some are upscale, like the homes of millionaires who skipped out on paying their taxes, while others are actually fixer-uppers. The real estate market is still relatively tight, so it is normal to see some properties sell for higher prices at real estate auctions. However, you can still find nicer homes at these auctions for better prices than traditional sales.
If you would like to learn more about real estate auctions, contact the experts at High Plains Auctioneers today. We can answer any questions you may have on How to Buy at auction, or How to Sell through us. You can call us at (806) 244-6776 or Contact Us by email for more information. You can also check out our Upcoming Auctions to see what we will have available.