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March 23rd, 2011 9:37 AM by David W. Welch
Real estate auctions serve a very valuable purpose as we work through the inventory of bank owned properties. If you are considering an auction, make sure you are aware of all the rules. Two things you really need to keep in mind is that the auction company will charge you, the buyer, a premium. Typically what I see is 5% on top of your winning bid. Keep this in mind as you bid, because that winning bid of $100,000 just became $105,000 with the premium added on top. The second thing you should be aware of are the auction rules pertaining to contingencies. They typically do not allow any from what I have observed. That includes financing and inspections. Auction properties are typically held open for a couple of weekends prior to the auction so you can visually inspect the property. As I understand it, you may be able to have the property inspected by a professional. Of course, you will have to pay someone to inspect a property you may not even get a chance to purchase. I also think if you spend a couple hundred bucks for an inspection, human nature will make you want to bid higher so you don't waste the inspection money, so be careful.
Keep this in mind about auctions. I started by saying they serve a very valuable purpose in disposing of bank owned properties. What I did not say is that most of the properties sold at auction are ones that nobody wanted when they were on the conventional market. I saw two houses this week that I expect will go to auction. The first one clearly has serious plumbing issues that have created a mold issue in the home. The second home appears to be eaten up with termite damage. Not every house that goes to auction has such severe problems. Many times the banks just refuse to listen to their agents regarding pricing. A house very close to my office sold at auction recently because they just priced it too high for the area. So, make sure you know what the values are before you start bidding, because there are no contingencies for appraisal.
David Welch Real Estate Optimist, Orlando Real Estate, Any Home-Any Phone