Bay Area Housing Auctions 9 out of 10 are overpaying: Bank Owned REO is the way to go!

Bay Area Housing Auctions 9 out of 10 are overpaying: Bank Owned REO is the way to go!

I read another great article on the Tulia Blog by Realtor Carl Medford. He outlines the fine print and what you need to know about the housing auctions going on in the East Bay. In my experience some savvy investors can do well at housing auctions but 9 out of 10 home buyers can co best by purchasing Bank Owned Real Estate through an experienced Realtor. Read on for Carl’s take.

Excited about the possibilities of buying a home at an auction? Lured by the prospect of the deal of a lifetime, buyers flock to auctions.

It’s a primetime show and auction companies know how to deliver.

The auctioneer starts talking, hopeful buyers start waving, people start running, the rapidly escalating numbers boggle the mind … it’s a fun, action packed afternoon! And as a bonus, they often provide food as well. Deals can be had …

If you know what you are doing.

In Auctions – Part 1, I provided some basic information about auctions – this post deals with the fine print.

And trust me, there’s LOTS of fine print.

In fact, it’s all about the fine print. Make sure you carefully read and understand EVERYTHING before making a bid. Educate yourself about the specific auction you plan to attend. All auctions are not the same. And the process is TOTALLY different than buying

As a buyer, it’s critical that you understand the terms and conditions. If you have questions, call the auction company to get specifics. They want you to understand and will usually take time to ensure that you comprehend the process. Some have orientation meetings. Others have a “mock auction” where you will actually get a chance to practice bidding.

There are excellent online resources available to help gather information.

In addition to the website for the auction you plan to attend, other helpful websites are www.realtor.org/auction and http://www.auctioneers.org/. The National Association of Realtors website includes the NAR Field Guide to Auctions.

So what are some terms a buyer needs to be aware of? Here are some typical ones:

1.   You need to demonstrate financial ability in order to receive an approved bidder package. You will not be able to bid without this pre-approval.

2.   You are buying properties “AS-IS.” Make sure you’ve carefully previewed properties on which you are bidding.

3.   There are no contingencies. The three typical contingencies you would see in a normal home purchase (loan, appraisal and inspections) do not apply at an auction. It’s like having a gun with a hair trigger and the safety removed.

4.   All sales are final. If your bid is accepted, you are locked in and will lose your deposit if you back out.

5.   You must put down a non-refundable deposit. When you win a bid and sign the purchase agreement, you will need to provide a 5-10% earnest deposit – let me say it again – that is non-refundable.

6.   There are typically no inspection reports. You may have a chance to tour properties in a “Preview Tour,” and might even receive a Preview Packet for the homes in which you’re interested, but don’t expect to see comprehensive reports such as termite, property or roof.

And, as mentioned last week, I recommend that a professional Realtor with auction experience represent you to ensure that you get the best deal possible and don’t overspend.

After all, you don’t want to get carried away with emotion and then discover that your fun cost you …

More than you should have paid.

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