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What Do I Need to Know for a Real Estate Auction?

by Kim Dieter

Most real estate sells at three types of auctions. Property owners often hire auction companies to sell property when they want the real estate to sell on a particular date. The bank or mortgage company triggers sale of real estate at foreclosure auctions when the property owners fail to make the mortgage payments. The county may sell real estate at tax lien auctions when the owners don’t pay the property taxes for several years. Opportunities exist for real estate investors to find deals at each type of auction.

Locating an Auction

Read the legal section of local newspapers, search online and find auction advertisements to locate upcoming real estate auctions. Auction companies often place signs in the yards of houses to be sold by auction. Foreclosure or tax lien auctions are usually listed in the legal section of newspapers and posted at the county courthouse.

Terms of the Auction

Auction companies or the appropriate county office schedule online auctions, live auctions or a combination of both. Carefully read the auction rules. Some auctions require potential bidders to register and pay a fee prior to the auction. Many auctions require partial or full payment at the conclusion of the auction. Often cashier’s checks, certified checks or cash are the only accepted forms of payment. Some auction companies charge a buyer’s premium, a fee for services based on the selling price of the real estate.

Inspection

Auction companies selling real estate on behalf of the owner usually schedule open houses or inspection periods for the house or property. Often homes and buildings sold at foreclosure or tax lien auctions are sold “as is” with no guarantees. Inspection may be limited or not possible. Interested buyers should research the property thoroughly by checking with the county recorder’s office, the county building department and the county appraiser. Locate the property boundaries, check for approved building permits, research the permitted use of the property and find the appraised value. Search for any liens or encumbrances connected to the property.

Price

Before the auction, find the selling price of similar property that sold within the past three months. Hire a contractor to inspect the house or buildings and give an estimate of the cost to make necessary repairs or upgrades. At a real estate auction, owners of the property may set a minimum selling price. The starting bid at foreclosure or tax lien auctions is often the amount of money owed for the mortgage or taxes. Formulate a competitive bid before the auction begins based on the recent selling price of comparable property and the amount necessary to fix up the buildings.

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