Properties sold at auction are final sale.
Government and private real estate auctions can provide investors with substantial deals on properties. Some properties require cosmetic changes while others may be move-in ready for prospective tenants. If you are new to real estate auctions, it is important to understand the disadvantages of bidding at an auction prior to making a financial commitment.
Cash on Hand
Most auctions do not allow you to obtain financing to secure a home. Some auctions will require that you show a minimum proof of funds before registering to bid. You must present a cashier's check or money order at the conclusion of bidding to purchase your property in full. Many new investors may not have or feel comfortable handing over a large sum of cash. Avoid bidding on deals that max out your investment dollars. Seek moderately priced real estate relative to your budget.
Sold As Is
Homes purchased at auctions are sold "as is." This means that the seller is not willing to render any services or repairs to the home and that a seller's disclosure statement will not be released. New investors may get excited at the idea of a home being offered at fifty percent of its projected market value, but without inspecting the home it is difficult to determine if the low price is a bargain or a doorway to a headache. Choose auctions where home address lists are published in advance so that you can drive by and inspect the property prior to bidding. Once you place a bid, you are legally bound to purchasing that property. Thus, avoid homes with the visible need for major reconstruction.
Experience
Bidding on properties amid other experienced investors can be intimidating. These investors can appear more knowledgeable, confident and skilled than you when you attend your first auction. You may wonder when to stop bidding when an investor continues to raise your bid. The worry of losing out on a fantastic real estate deal may begin to seep in. However, until you gain experience, avoid competing for properties at prices too close to your max bid price. Experienced investors use a variety of complex strategies to ensure the profitability of their investments that you may not be able to execute at your experience level.
