Here are some tips on what you should do before and after the gavel falls to help you avoid the pitfalls of the bidding bazaar.
Find market priced properties
WHAT TO DO
Do read the fine print in the auction catalog. Each auction has its own rules. Read and understand the “terms and conditions.” Read the sales documents — the purchase agreement, the home inspection, appraisals, disclosures. Read everything.
Do an inspection before the auction. Hire a licensed home inspector, walk through the property with the inspector and carefully examine the physical condition of the foundation, the roof, the plumbing, electrical, appliances and other amenities. Get a written report, detailing any faults and the cost to repair them.
Do factor any repairs into your final auction bid. Most auction properties are sold “as is,” meaning you are responsible for any and all repairs. Add the repair costs to your bid.
Do understand what type of auction you’re attending. Buyers prefer “absolute” auctions, meaning there’s no minimum bid and the seller must take the highest bid, regardless of price. Sellers prefer “reserve” auctions, meaning they have the right to turn down the highest bid. Understand the auction jargon.
WHAT NOT TO DO
Don’t go alone to the auction. Hire a good Realtor, attorney, or accountant — or all of the above — to attend the auction with you. Have your Realtor review the properties, contracts, disclosures, inspections, appraisals and other key documents with you before the auction.
Don’t overbid. Set a realistic price and stick to it. Many first-time auction buyers get caught up in the excitement of the moment and pay too much for a property.
Home ValueTrac – Find out the latest market value of a property
Don’t set your sights on just one property. Inspect and research five to ten properties to increase your chances of successfully buying an auction property. If you’re prepared to bid on only one house, you may walk away empty-handed — even though other similar properties were available at your grasp.
Don’t expect to get your deposit back if you terminate the purchase agreement. Cancellation of the purchase contract could cost you your initial deposit or down payment — or both. Read the fine print.