Conventional Auction
A conventional real-estate auction is usually conducted with multiple properties. If you're dealing with an auction house — and there are many throughout the United States — you will more often than not have access to inspect the real estate prior to the sale, and you will also receive a bidder's package. A bidder's package will include a physical description of the property, a copy of the title report, survey, leases, and other financial information that will accompany the property contract you will be required to execute if your bid is accepted. This material allows you to become familiar with all of the financial and legal obligations associated with the real estate you're interested in. Then, all you need to concentrate on at the auction is how you want to bid.
In a public real-estate auction, you will be required to buy the property as is, with no obligations by the seller. Most times, you will also be required to make this a cash sale, not contingent on a mortgage. In a public realestate auction, you oftentimes have more than a day to deposit the money required to close the real-estate transaction.
People tend to think bidding at a real-estate auction drives prices up. That certainly can be the case, but you may find the bidding starts even lower than what they ask for an opening bid, depending on the marketplace. You never know how it will go.
There are two golden rules at auctions. One is
Review the information in the bidder's package carefully with an attorney. Know what you are bidding on!
Watch for the announcement of dates when prospective bidders can go through the properties being auctioned. Naturally, you should take a detailed look at any home that interests you. You can bring a house inspector or engineer with you, too, to give you an idea of any serious problems and the price for fixing them. Here are some things to keep in mind:
Remember to keep the renovation expenses in mind when deciding what to bid.
Be certain the house you want will be delivered vacant. Government-sold properties usually are, but other sales might not be.
Ask about the title. Will you own the house free and clear? Check with the people at the administration desk at the auction, or ask in advance at the auction company or real-estate agency handling the sale.
Ask in advance how the auction handles the actual buying of the homes. Some are strictly cash sales. You will almost certainly be required to pay some small amount of money in order to bid.
Be sure you understand whether, if you are the winning bidder, you will be given an allotted time after the auction to secure financing or whether you must be preapproved before the sale.
Remember, you cannot blame a seller for not telling you the basement floods regularly. Keep this point in mind as you raise your hand or card to bid.
There are many attendants in the auction room to help bidders. They usually wear blazers imprinted with the name of the auction company or some other distinguishable outfit. Ask them any questions you have.
Pay very close attention. It will help if the property you want is not one of the opening two or three properties up for auction. That way, you can become familiar with the speed of the process before your prospective home comes on the block. Be very sure you are bidding on the property you want. With the speed of the proceedings, mix-ups can occur.
Once the auction starts, things move rapidly. There might be a few minutes of rest between house number nine and house number ten, but once the bidding starts on ten, it can be over in less than a minute. If you want number ten, you have to react speedily. There is no time to agonize over whether to increase your bid. The auctioneer's chant is also likely to be unfamiliar and distracting to the novice auction attendee.
You don't have to be the first bidder at the auction. Oftentimes, getting a sense of where the bidding is going before you raise your hand is important. Remember, the winner at the auction is the last bidder — the last bidder becomes the owner of the real estate.
In some auctions, a hand signal shows your intention to bid; in others, you are handed a card with a number on it when you enter the auction room. You raise the card when you want to make an offer on a property.
Don't be shy. Speak up for the home you want, perhaps loudly if it's over an excited crowd. If you are concerned you will not be able to speak up or that your reflexes are too slow for this speedy show, bring a friend who can do the bidding for you. Be careful not to get so carried away by the adrenaline-pumping proceedings that you overbid. Set a firm limit before the auction that represents your top offer for any property. You can arrive at that figure by comparison shopping at similar homes for sale in the nonauction arena.
With some auctions that involve a few dozen properties, an on-site lender can offer good financing terms because that institution expects to finance a good number of homes sold during that sale. Ask about their terms, of course, but you should also shop around to see if you can do better.
