Real Estate Auctions – Deal or No Deal?
It’s very easy to register, pre-qualify and gain admission to a home auction. Many of the properties are being sold by banks and mortgage companies who really want to unload them. They are not realtors and are only in possession of these homes and commercial buildings because of foreclosures. This is an upside for you because they are in a position where they have to sell. The down side is that investors will often over-bid on a property to drive up the price. You need to be careful that you don’t fall into the trap of paying too much. In a normal real estate sale you have time to inspect a property and determine whether it is worth the price that you are about to pay for it. This is not the case at auction. You can have a specific property inspected beforehand if you know when it’s going to be auctioned off but you need to win the bid on it or all your work and money will be wasted. It’s important to know what a property is worth and what you are willing to pay for it before you go to the auction. A pre-inspection will also tell you if you need to invest more into the property to make it re-sellable or rentable for new tenants. Additional upsides to buying a property at auction are huge selections and starting bids as low as $1000. Think carefully before you buy a property that seems to have a price that is too good to be true. Many of these are run-down homes with very little upside or investment value. Even if it’s your first time at the auction there are others there who have looked at every property that is available. If no one else is bidding on it, something is wrong with it. You could pay what seems like short money for something that is completely worthless and deposits are non-refundable. So what’s the answer to the question? Deal or no deal? Do your homework and you can definitely find a good deal. Walk in blind and you could take a bath. Auctions are great for individuals and investors looking for second homes or income properties, but if you’re hinging your hopes for a first home on one you should pick it out first and know how high you’re going to bid on it. In many cases auctions are standing room only so competition is fierce. Don’t get carried away and buy yourself into a financial disaster. 
With thousands of homes now available to the public at auctions, what are the benefits and potential pitfalls for buyers? Are you getting a great deal or just attaching yourself to an albatross? A good number of these properties were lost due to the structure of their previous owner’s financing, but would fixed rates really have justified the cost of the home in the first place? More importantly, what is the property worth now and how much are you willing to bid at auction for it? 