Buying a home can be an expensive endeavor and most homebuyers want the most for their money. Spending less on the initial purchase leaves more cash available for customizing the home. Auctions may offer an opportunity to get a house for less than one that is traditionally listed. This option is not for everyone, so here are some details to decide if it is right for you.
Owners Can Be Involved in the Sale
Some homebuyers may worry about auctioned homes because they do not want a foreclosure, as foreclosed homes have the reputation of being abandoned or damaged before the sale. The risk is real, as some reports show that many of these properties may have experienced so much damage, they are no longer acceptable for mortgage financing.
However, auctions do not only occur because of foreclosure. Some homes are tax-acquired properties that are put up for auction by the owners. Some property owners prefer a fast sale rather than worrying about the best price, and auctions offer a quick way to complete the transaction.
Inspections Are Nearly Impossible
Auctioned properties are not always open for interior inspections, so people who have an interest in bidding on the property should understand they are taking a risk. However, there are ways to gain a better idea of the condition of the home. Viewing the property from the exterior enables bidders to see the condition of the roof, windows, overall structure, and the upkeep of the yard.
Many auctioned houses were once offered for sale by the owner or a realtor, so you may find photos online of the interior. Public records can reveal when the home was last sold and its value at the time.
Gather as much information as possible in this manner to estimate the repairs the home will need. The bidder must feel comfortable that they can finance the repairs or complete the work themselves.
Cash is Necessary
Prequalifying for a loan is not necessary to buy a home through an auction because it is almost always a cash transaction. Buyers that want to use this method need to secure the money before the bidding begins. The auctioneer may want proof of the ability to pay before they accept any bid. Prepare for this by having certified checks or cash on hand.
This does not mean that only wealthy investors can buy auctioned houses. There are ways to get the cash needed. Some people rely on their savings accounts or a combination of savings and personal loans while other buyers take equity from a home they already own to invest in the auctioned house. Another possibility is to secure financing from individual investors, family, or friends.
Title Searches Are Recommended
Buyers need to ensure the home they bid on is not going to include a lengthy legal battle. A title search helps the buyer know what type of liens are on the property. Liens for unpaid taxes or utilities could become the responsibility of the new owner and result in thousands of dollars of unexpected debt.
You can perform a title search on your own, but a title search company can provide a more comprehensive report. The company may offer insurance on the title after they determine it is clear.
Auctions help people buy the home of their dreams sooner than expected and enable others to gain future rental property. Even cautious buyers can enjoy this form of real estate transaction with proper planning. At Charles L. Moles Real Estate, we can help. We are experienced auctioneers, brokers, and appraisers. Contact us to discuss your real estate needs.