This option, as with most major decisions, involves both pros and cons. However, comparing the two, the beneficial factors of Buying a House at Auction seem to outweigh the risks!
- Time saver! Usually, sale of an Auction property concludes much faster than buying in the traditional way.
- Looking for a lower purchase rate? This is probably the answer!
- Care for a wide scope of options? Houses at Auction usually provide this.
- Less competition, possibly, which should prove beneficial
- Interested in unusual properties which Estate Agents are not too keen on selling? This option could offer just that!
- A proper understanding of all auction rules and paperwork involved, probably with the help of a conveyancer or Estate Attorney.
- Knowledge of the current and future property value, with advice on any remodeling work. These details can be obtained with assistance from appraisers, contractors and Estate Agents.
Details: Browsing through online sites/websites of governments or Estate Agents can provide more detailed information on Land and property auctions, which will give the required background to choose from.
- Most auctions are now done online (the more popular option) which also allows more time to wrap up the deal
- Then there are the in-person auctions, which are done at a physical location and which usually conclude rapidly at the site itself.
Risks: Having a limited knowledge of the properties for sale is risky. Some auction properties do not allow an inspection of the interiors. Hence, it is advantageous to look at properties which do allow a legal inspection before bidding. The property auction house can be contacted for a thorough viewing of the property and surroundings, and this will help in deciding whether the property is worth “going for”.
Important: All legal aspects should be checked – for claims, liens and occupants.
- The property should have a clear ownership title and not be occupied.
- Also, in the case of Foreclosure properties, where the owner is in default with mortgage payments, the lender can put the property up for auction
- Another aspect is the Property Tax default, where the tax authority can seize the property for non-payment of taxes and put the same up for auction.
Difference between guide and reserve price:
- the former is the commencement price for bidding, and
- the latter refers to the minimum price that the seller will accept, which is usually undisclosed to the bidder but may be up to 10% higher than the guide price.
Auction confirmations: 2 types exist.
- the lender confirmation auction where, even if you are the highest bidder, the seller does not have to accept your offer.
- the absolute auction, where the highest bidder wins the property.
Be prepared! Once your bid is successful, the deposit (or a portion of it) will need to be paid immediately.
After weighing the benefits against the risks, “Should You Buy a House at Auction?” seems to have a positive foregone conclusion!