Property Auctions Are Not For The Weary
Posted by David Rosenfeld on Jan 17, 2013 - 7:36:31 PM
LOS ANGELES—It’s always great to find bargains. Whether it’s at your local supermarket or at a corner thrift shop. But when you hear stories about great bargains found at a foreclosure auction, it’s hard to resist looking into it.
Certainly there are bargains to be had for the potential home buyer, but this is not for everyone. Auctions are a good way to find excellent properties, but they are also not for the unsophisticated buyer. You must do your proverbial homework before you jump in and decide go to an auction because once you buy it you own it. And no amount of whining, crying and complaining is going to get you out of a bad investment.
First, there are several types of property auctions. For our purposes here, we will consider the 3 most common. They are the foreclosure auctions, held on the steps in front of City Hall, probate or court auctions, sometimes held in front of the house in question or in court, and a private auction. But either way, you have to show up with certified funds and if you win the auction, you have to be ready to pay. Court auctions may sometimes, with prior arrangement; the court will allow you some time to procure financing. Private auctions have their own rules, but usually allow for financing either with their lender or your own lender.
Courts may or may not allow you to inspect a property so you need to take advantage if they do. Make an appointment and pay a visit (with all your experts) to the property and do your due diligence. It will save you money and make you money. You want to find any potential problems before you are the owner and you may want to adjust your maximum bid according to what you find.
Know your stuff when attending property auctions.
Look for water stained walls, water puddles or muddy ground or saturated grass area which could mean leaky or broken underground pipes. Either way, these are major problems that must be dealt with and could cost thousands of dollars if it means re-piping or replacing expensive underground waste lines.
Checking for termite damage and structural damage is also important for the potential buyer as these can be deal breakers from the get go. But these are just some of the things that could be deal breakers if it turns out they need costly repairs, so bring a home inspector to ensure you have a proper inspection before you make your first bid.
Oftentimes, a court will have an accepted offer and allow for an over bid at the court, usually the first over bid will be required to be five to 10 percent above the original bid and then in increments of hundreds or thousands, depending on the judge. When you get a loose-cannon bidder, you may see properties sell for more than retail prices so be careful.
But before you make any bids, I encourage you to attend lots of auctions and talk to the people at the auctions and get a feel for how it works and how you can benefit. You will likely also see that while there may be lots of people there, only a few will bid. Many of those who don’t bid are generally those with some kind of system they learned from an infomercial real estate seminar about buying at auctions.
But once you make your bids and lose out, it may not be over. Sometimes a buyer may back out and the court will look for the second and third highest bids as possible buyers. So it may not be over, just yet. If you’re a potential home buyer, keep an eye out for new listings and also for auctions and see if there are some properties that may be suitable for you and your family. Bargains are still out there, but you won’t find them unless you look hard and then do your homework.
David Rosenfeld is a Real Estate broker and president of Advantage Real Estate, a Real Estate and investment firm in Santa Monica, and a Rotary Club member. He has more than 20 years experience in commercial and residential property investments and financial counseling. He can be reached at email@example.com.