Real Estate Auction: Proceed With Severe Caution

Real Estate Auction: Proceed With Severe Caution

As with any type of real estate deal, there are pitfalls you will want to avoid.Trial RunThe first thing you may want to do is go through a dry run. Basically choose an auction or two and attend to get a better understanding of the process. You should also pick up all the paperwork and do all the research on the property as you would if this were an actual property you were interested in. Next, attend the auction and pay attention to the actions of potential buyers.ResearchWhen you find a property or two up for auction that you are interested in your first step is going to involve research. A home or property up for auction is sold as is where is, with no warranty or any guarantees. One very important piece of information you need to look for is potential secondary liens. It is not uncommon for homeowners to receive home equity or improvement loans and be behind on property taxes. All of these financial obligations will survive the sale and you as the buyer will be responsible for paying them or risk losing the property to auction yourself.First, do a title search for potential second loans and a visit town hall to discover if there are any back taxes, fines or mechanics liens against the property. You will even be held responsible for past due HOA fees so be prepared.Property InspectionYou will want to thoroughly inspect the property before the day of the auction. Again, these auctions are as is and if there are any problems, you are stuck with them. If possible, employ a qualified inspector to accompany you and do a thorough home inspection. This may cost you several hundred dollars now, but in the long run, it could save you thousands! Remember any images present at the auction are going to present the home in the best possible light, visiting it ahead of time will give you a clear picture of the properties current condition and whether or not it is still occupied. If the owners are, still in occupation you will have the unpleasant duty of having them evicted, which can take time and result in further damage.Do Not Get Carried AwaySet a price for the home before you go to the auction, and then stick to it. Auctions are notorious for out of control bidding, particularly if you get into a bidding war with another individual at the auction. No matter how badly you want the property remember it has a finite value, and you should not pay more than that for it.ConclusionOnce you have done your due diligence and inspected the property make, sure you have your financing in order as well. If you have cash reserves, great, but most people will need to secure additional financing for most properties. Real estate auctions offer an opportunity for you to get a great deal on property, if you follow some guidelines such as those listed above.

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