How to Buy a Cheap House at a Real Estate Auction

If you want to buy a cheap house, now is the time to learn about real estate auctions. Due to the number of properties going into foreclosure and lending institutions needing to eliminate properties, there will be many of these auctions over the next few years. Banks are limited in the amount they can lend by the amount of property they have on their books and auctions are a way to sell property quickly. There will be a lot of property bought and sold this way until the foreclosure crisis is brought under control.

Real estate auctions are not too different than other types of auctions, but there are a few differences you need to know about. Be sure you understand the rules and regulations of the specific auction you are attending as they may be different from auction to auction.

If you plan to buy a property to live in, the process is fairly simple but you still need to do your homework. You should not only check the property out personally but also the area where it's located. Spend quite a bit of time doing this if you're not familiar with the area, because the structure can be changed to suit you but the area can't.

Try to find someone with knowledge in the construction area to look at the property with you. Have them point out any problems they see and give you a ball park figure to repair them. Property bought at auction is normally sold "as is and where is" with no guarantees, warrantees or disclosures so inspections need to be very thorough.

After deciding on a property it might be a good investment to have a property inspector look at it. The money will be well spent if something bad turns up. If you can afford it have the property appraised or see if your lender will do it for free. A BPO (Brokers Price Opinion) by a Realtor will give you a good idea of what the property is worth and won't cost you much. A real estate agent can prepare a free property profile which will give you an idea of the value.

For any repairs that will have to be done prior to moving into the property, you need to estimate the cost and subtract the amount from the maximum you're willing to pay for the property. Don't forget the auctioneer fees and any other expenses which will also need to be subtracted from the amount you're willing to pay.

Be sure to check the auction guidelines to see what is required to be a bidder. Many auctions require a deposit on auction day and you may also have to show a bank letter of guarantee, banker's draft or a cashier's check in order to bid as you must prove you can buy what you are bidding on. If you post a deposit on a successful bid, it normally must be paid in cash, by certified or cashier's check, or if you have a bank's letter of guarantee by a personal or business check. You should get pre-approved for a mortgage for the amount you'll need to complete the transaction. No purchase can be contingent upon financing and all successful bids are based on the ability to close so have your financing in place before you bid.

Go to the auction at least an hour before its due to begin so you'll time to make sure your registration is in order and the properties you're interested in are still available. Verify there are no last minute changes that might affect you. The auctioneer will usually go over the bidding process before the auction begins so you need to pay attention.

If you've done your home work you should know what you can pay for properties you're interested in. Recheck your figures to make sure all the costs have been calculated. Make sure you have a firm maximum bid and don't go above that figure. Keep in mind that there will be other properties if you miss this one. It's usually a good idea to not bid till the opening excitement has died down. Your bids will just add to the frenzy, so wait until it appears the bidding has stalled then jump if the bidding is still under your maximum. Don't bid on any properties that you haven't inspected thoroughly. What may sound like a bargain could turn out to be a money pit. Many times the first few properties go for less than normal because everyone will be waiting to see what's going to happen. Be ready in case your property is one of these.

Penalties can be costly for backing out of a winning bid, so make sure the property you're bidding on is one you really want. When you have bought a property, contact your lender right away so the time you have to close doesn't run out on you, as there is usually a time limit on paying the balance of the winning bid.

To get a feel for the way an auction goes it would be a good idea to attend one without planning on buying anything. This way you can learn the procedures and get the confidence to actually bid on a property when the time comes. If you're looking to buy a bargain home an auction is probably one of the best places to do it. Just follow the suggestions and recommendations I've given and you should have no problem bidding like a seasoned auction buyer.

Sources:

http://www.naarealestateauctions.com/consumer/index/mls

Real Estate Auction Guide http://www.realestateauctionguide.com/

National Association Of Realtors http://www.realtor.org/auction/auctions/auctionbasics

How to buy a property at an auction http://www.ehow.com/how_5835_buy-home-auction.html

RealtyTrac http://www.realtytrac.com/foreclosure/auction/how-to-buy-homes-at-auction.html