|You just picked up the weekly newspaper and noticed what might be the perfect home you've been searching for, however it's going to be offered at auction within the next two weeks.
What do you do?
First and foremost, if you're buying using financing, make sure your lender understands the home you are looking at.
Auctions are not contingent on financing, appraisal or inspections.
In other words, if you buy, you normally close on or before 30 days from the date of auction.
Second, know what you're buying.
You don't get to change your mind after you buy at auction.
If you are paying cash and no financing is involved, you need to do your homework on the home and location to make sure before the auction this is the home for you.
Once again, the sale is not contingent on anything and you must close on the home if you are the winning bidder.
Auctions are just about always going to require larger down payments day of sale.
This is to protect the auction company and seller from buyer default.
For instance, if you are the winning bidder on a $100,000 home and the sale terms state 10 percent down payment day of sale, you must have $10,000 that day to put down. That money is held in escrow by the auction company until closing.
When you close on the home, you are credited $10,000 toward the purchase price. But, if the buyer defaults, the $10,000 is usually dispersed to the seller minus any auction expenses.
You can hire a real estate agent to represent you during the buying process, however most auction companies and sellers do not pay compensation to a buyer's agent.
Some auctions will advertise buyer-broker participation, but special regulations will apply.
Most buyer agents will want you to sign a buyer's agreement agreeing to pay them a commission if you buy a home. This agreement will also apply to "for sale by owner" or "auction" properties.
One final note, homes at auction are offered "with reserve" or "absolute."
Absolute means the home is selling to the highest bidder, where the seller may not withdraw the property from the auction after the auctioneer calls for bids unless no bid is made in a reasonable time, where the seller may not bid himself or through an agent, and where the seller will deliver marketable title.
Absolute usually draws a larger crowd, which in turn usually means a higher selling price.
An auction with reserve is an auction at which the seller or his agent reserves the right to establish a minimum bid, to accept or reject any and all bids, and to withdraw the property at any time prior to the completion of the sale by the auctioneer.
Also be aware if the auction includes a buyer's premium and the percentage. A buyer's premium is when a buyer pays an extra amount of money (usually a percentage) to the auctioneer. The amount and date must be advertised in advance.
Auctions are a great way to purchase a home or investment property. Being an educated auction buyer will lead to an easy transaction with no surprises. MP
Gregory Goff is an auctioneer with EXIT Realty Bob Lamb Auction Division.
If you have other questions or concerns, visit TheAuctionDivision.com or contact Goff at 615-653-0080 or ExitRealty@GregoryGoff.com.