Auctions bring in many opportunities to an active buyer. When the economy is
tough, people and business need money and auctions take place to create
liquidity quickly. many times auctions are conducted by lending institutions
after they own a portfolio of property when they need to rapidly create
liquidity (basically, when people default on their mortgage obligations in tough
economy and the bank has no dispose of the property).
There are auctions for
private individuals who need to create liquidity by selling their property.
There are auctions by developers who have built new homes, town homes, and condo
minimum and need to get out from under the gun of owning the property at a time
when they are unable to afford the expense of maintaining this real
estate.
Whatever the case may be, when you acquire property at a real estate auction
you should make sure in no uncertain terms that you are familiar with the
neighborhood and community before you choose to bid on the property. If you are
going to buy a property at auction in order to flip property, you must also set
your limit on bidding and be sure you don't exceed that limit - no matter how
tempting the auction is.
You can find out about auctions by looking in the news papers under the
"Auctions" sections. Newspapers are far and away the best source of advertising
for this type of sale. Call the phone number listed in the paper or go to web
site and follow the instructions that the auctioneer gives. Typically, you are
able to inspect the property at specific times and, if you decide that youlike
the property, obtain a bidders' package that includes the following
- The date of auction
- A standard contract to be used
- The title report
- A survey of income and expense info
- Disclosure and the rules of earnest money deposits required
- The expected closing date
Auction can be conducted under various rules
- An absolute auction is one in which the property will be sold to the
highest bidder, regardless of how low or high that price ends up being.
- An open minimum bid auction is one in which a property will be sold for no
less that that opening minimum bid, but may also sell for much more
- An auction with reserve means that the seller reserve the right to accept
or reject a bid at the auction and doesn't have to sell the property at all if
prices are too low
One of the major advantage of an auction for sellers is that sales close much
faster than usual. This means that the seller gets fast money, but it also means
that you can buy the property at a discount price and sell it quickly. Just keep
in mind that "winning" is not about paying the highest price for the property.
In fact, you win when you pay a low price. Set your limit for where you'd like
to pay and don't exceed that standard. Don't get caught up in a bidding war and
overpay for property that you want to flip. Your profits in buying it cheap
enough to flip it. Walk away if the bidding gets too high.
