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Key Facts Buyers Should Know About Real Estate Auctions

9 September 2020

Cody Day

You've probably seen the advertisements or spotted the signs on lawns, and it sounds very tempting. Buy a home for just pennies on the dollar? Yes, please. Real estate auctions offer the promise of a bargain, but read below to get a few facts before you go and bid.

1. The homes you find being auctioned off are not being listed by traditional real estate agencies or even by individual sellers. Instead, these are likely homes that were foreclosed on by a lending institution. Lenders have no interest in becoming real estate sellers, and auctions are a way to rid themselves of homes while getting some of the home's value back.
2. There are plenty of real estate auctioneers willing to take on the unwanted foreclosed homes and take them off the hands of the lender. The homes may be owned by the auction company, or the lender may hire the auction company to auction off the home and pay them a commission on the sale.
3. Buyers may find that efforts to view the home or find out detailed information is met with a brick wall. In most cases, auctioned homes are sold as-is. You might be able to peek in a window at an address, but being allowed to conduct a professional home inspection is uncommon. In many cases, buyers are able to view photos of the interior rooms online.
4. If you are interested in bidding on a home, be sure to familiarize yourself with the way the auction company does business. Read all the information, including the small print. For example, find out how much cash you will need to bring with you if you end up winning the home at auction.
5. Many of the auctioned homes are sold sight-unseen to flippers who expect to invest a lot of money in the home and then sell it to someone else. You've probably seen the television shows about flipping. What that means for a buyer is that you can expect to spend money getting the home habitable. Many auctioned homes lack basic systems like heating, cooling, wiring, plumbing, appliances, flooring, and more.
6. You must arrange for financing before you bid, and lenders are understandably reluctant to lend money to buyers for an auctioned home. One exception, however, might be a lender who owns the home. Expect also to pay a fee to the auction company for the privilege of buying the home.

Be sure and consult with a real estate agent before you bid on a home. They can help you get more information about the home's history and condition before you make a bid.

To learn more, contact a resource that offers real estate services.

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