How Does Buying A House At An Auction Work?

Most people dream of owning a house. It's a once-in-a-lifetime purchase that instills a sense of pride and accomplishment, of belonging to a community. Owning real estate also brings with it a sense of security—you have a roof over your head and a source of income in difficult times.

But did you know that there are alternative ways of buying property besides the traditional scouting methods for real estate listings or working with real estate agents? Have you considered home auctions?

Why Buy A House At An Auction?

Real estate opportunities are few, especially if you're on a tight budget. Suppose you've already shopped around a little. In that case, you'd agree that a compromise may be necessary—a smaller house, no yard, a different neighborhood, etc. Even if you find a home that's within your budget or in a location you love, the sellers may not budge from the market price. If you're investing your life's savings, you should be allowed to negotiate.

This is where auctions offer a prospective buyer an advantage—the opportunity to buy a house at the lowest price possible. 

How Does Buying A House At An Auction Work?

Buying a house at an auction is a sound financial decision for several reasons. Frist you might be looking to save money. Two you might be looking for a house in a prime location. Three you might be looking for a ready-to-move-in status? Or four you might be looking for no construction delays, etc. Buying a home at auction can be riskier as compared to buying through traditional channels. It is therefore essential to be aware of how real estate auctions work. Knowing what to expect, how to participate, and what to avoid can stop you from making a bad deal.  

How Do You Participate In An Auction?

Now that you've weighed the pros and cons and are confident that this is your best shot at purchasing real estate at a discount, how do you proceed with it?

Find An Auction

As agents get no commission on these sales, you'll be hard-pressed to find one to help you. However, you track foreclosed properties on sale and get information about auctions in your area through your local government. Direct multiple listing services (MLS) and online sites such as RealtyStore.com provide relevant information. 

Do Your Research - When Buying A House At An Auction

Learn about the house before the auction. Is it worth investing in? What's the market value of the home? Most importantly, what condition is the house in? When buying a house at an auction, you may not get the opportunity to have it assessed or inspected beforehand. If possible, drive by the place to get some understanding of its present condition. 

There may be other claims on the property. Consider hiring a private investigator or agency or even a knowledgeable real estate agent to assess the property before you make a bid. 

Get Your Finances In Order

Ensure you decide on a budget and stick to it. There's no point going to an auction if you're going to overspend and get stuck with a financial obligation that you cannot afford. 

Depending on the property and the auction house's rules, you'll be expected to pay a certain amount upfront. Carry cash or look into what payment systems are acceptable. Some auctions accept cashier's checks. Some don't. Do your homework well. 

Get Your Head In The Game

Now that you've gone through the entire process, it's time you start bidding. Remember, stay calm and bid smartly. You won't just be bidding against other prospective homeowners. You might find intense competition from professional fix-and-flippers. Since competition can get fierce, know when to stop. Never overpay. Also, ensure you've considered post-auction costs such as getting title certificates and insurance. All of these can cost a pretty penny too. 

Home Auction Bottom Line

Understanding how auctions work offer some of the best real estate opportunities. Avoiding a bad deal is as simple as educating yourself on the possibilities of the house under the hammer and making informed decisions without driving yourself into a financial quagmire.

Remember, due diligence is critical.