What You Need to Know About Real Estate Auctions and Wholesale Property

From Buyincomeproperties.com

Real Estate Auctions
What You Need to Know About Real Estate Auctions and Wholesale Property
By
Sep 6, 2005, 18:22

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.