Buying Houses at Auction
Some houses, not necessarily distressed properties, are sold through auctions. Real-estate auctions grew in popularity in the 1980s and today are fairly commonplace. Sometimes just one home is being sold, perhaps to close an estate. In other instances, the auction will include a number of condominium units in a complex in which the developer has run into financial problems.
Auctions have an allure: They are exciting, they let you buy at your price, and they may just be your opportunity to get into homeownership. Before attending an auction with the serious intent of buying a house or condominium, you should do some homework. Try to acquire all of the printed material on the sale you can (known as the bidder's kit), and visit the homes that interest you. Auctions are conducted as each auction company sees fit — some auctions are even online.
When real estate is in an auction it means the seller needs instant liquidity, or in other words, the seller needs to sell the house and get the money right away. What that means for you as a buyer is that you should be prepared with your financing in place and ready to go on auction day. That may be difficult, since most mortgage lenders require an appraisal and a thirty- to sixty-day turnaround time for preparing their appraisal, but maintaining a credit line or a home equity line that will be available to you whenever you need it will make you successful with auctions. Certainly, having the cash available to buy your property outright is possible as well.
If possible, it may be helpful for you to attend a couple of auctions before the one you are interested in. This will give you a chance to see how real-estate auctions are conducted and for you to become familiar with auction procedures before bidding yourself. You will find fewer auctions in good economic times, and it only makes sense that you will see more auctions during tough economic times.
You can find auctions in your local newspaper or look up “Auctioneer” in the Yellow Pages. A website also worth checking out is National Auctioneers Association at