When it comes to purchasing a home, many people take the traditional route where they find a house for sale. You get a chance to perform a walkthrough, have their real estate agent figure out the fair market value of the house, and place a bid close to the sales price in the hopes that the seller will accept it. Then counter bids fly between you and the seller, or other buyers until the seller accepts yours.
A house on auction is a bit different. A house placed up for auction will usually be in foreclosure because a homeowner stopped paying the mortgage as they received a notice of default from the bank. When a bank places a house up for auction, they usually set the price for the amount of the unpaid mortgage or below that amount. Banks are not allowed to make a profit from an auctioned house. Another house that may be on the auction block is one where the property owner failed to pay property taxes or local and state income taxes as there are tax liens against the house.
Advantages to Buying an Auction House
Anyone can experience financial difficulties that will force their house into foreclosure. So you may find a luxury home at a significantly reduced price.
If you are looking for a house that you planned to gut out anyway and completely renovate, an auction house can provide that possibility at a lower price. Some auction houses fall into disrepair, haven’t been maintained in ages, may have been deliberately trashed, or might have serious structural problems. Having a repair budget set aside and making the house exactly how you envision it could end up being a great deal for you.
More first and second home buyers are looking at properties that are in their best move-in conditions. Auctions will have fewer buyers and are riskier purchases since often you are not allowed to inspect the house or even get inside for a quick peek until after the purchase. So there will be fewer buyers at auctions as often find real estate investors there.
Still the Same Escrow and Closing Process
Bidding on an auction house is different. An auction can take place online, at local government courthouses or even hotel conference rooms. You’ll need cash or a cashier’s check to pay for auction costs, bidding fees, and to provide an earnest money deposit. Yet the escrow and closing process is still the same as traditional home-buying methods. It is a good idea to get pre-approval for the mortgage from a lender so you know how much money you can bid and place toward repairs. At The Garner Group, you must be preapproved prior to making an auction bid, which is a nice step to get out of the way, in the process of buying a new home. Purchasing a house at auction isn’t for everyone. There are many risks involved as well as many advantages. Learn as much as you can about the process and give any of our brokers a call for more information about the auction process.