How Do You Buy A House At An Auction?

You can find a lot of houses for sale on the internet, like on sites such as Zillow, but these are not the only properties for sale. Oftentimes homes are auctioned due to foreclosures by the bank, or other reasons. Investors and buyers are able to capitalize on auction opportunities to buy a house at significant discounts.

Why a House Would Be Auctioned

Homes can end up on auction for several reasons. The most common reason you will see a house auctioned off is due to the owner suffering financial troubles and the house ending up in foreclosure. If the homeowner fails to make their regular payments to their lender, the lender will have no other option than to foreclose on it, thus the house ends up on auction. Other reasons include the owner failing to pay their property taxes or issues with homeowners associations.

Auction Process for a House

Auction properties are not as easy to find as regular listings, and inexperience in how to bid at auctions can often present as a barrier to entering these types of auctions. If you are interested in purchasing a house at auction, these are some tips to help.

Your first step when deciding to purchase a house at auction is to visit an auction and see what the atmosphere is like during the sale. Auctions are all run a bit differently, and you will want to see how the process works before jumping into one yourself.

Once you get a feel for how auctions work, start tracking foreclosures by checking your local newspaper. You should also research other foreclosure tracking tools. Check with your local auctioneer company, such as High Plains Auctioneers, and learn about homes they have coming up for auction on their calendar.

There are two classes of real estate auctions- the blind and the open. In the blind auction, bidders do not know what others are placing as bids, in the open auction, all bidders hear each other’s bids.

In both of these classes, there is a reserve value or a minimum bid the seller will accept as a winning bid. The reserve value or minimum bid that will be accepted is typically the amount of the debt owed on the property, such as the value of the loan or the amount of taxes owed.

In the open auction format, each new bid must be higher than the last one, and the auction will end when no-one places a new bid. In some cases, there are time limits placed where the highest bid is the winner at the end of the time.

Know the Auction Property

If you learn about a property coming up for auction that you are going to try and win, consult with an experienced real estate agent so you know the estimated market value. Knowing the estimated market value will give you an idea of how high to bid and what the property is likely going to sell for. You may even be given permission through the agent to view the property ahead of the auction day.

Buying A House at Auction

The main advantage of purchasing a house at auction is the opportunity to buy it for below market value. There are also risks involved in this process including you can’t have the property inspected, which could result in surprises such as structural or physical damages.

When you purchase real estate at an auction, you should be prepared to pay at least 10% of the winning bid the day of the auction. You will also need to close on the property within 30 days of purchase.

After winning the property, you are responsible for investigating outstanding liens and title issues, and you will be responsible for paying all back taxes as well as unpaid HOA fees if applicable.

Advantages of Buying a House at Auction

Buying a house at auction can bring you a great bargain, but you need to do a bit of homework first and understand the risks. Learn how to research the title and make sure you can pay the winning bid in cash, and work with people who have experience in the industry and process.

Where to Learn More About Buying a House at Auction

Call High Plains Auctioneers today (806) 244-6776 to learn more about buying a house at auction. Talk to our experts and learn more about the auction process, and check our schedule to see when new auctions are scheduled.