Beginners look at property auctions as a way of snagging a bargain, or finally getting that farm they've had their eye on for twenty years. To the seasoned pro, it's just another day at the office; a handy way of adding to their portfolio. To get the best out of them, you need to prepare in advance. Here are a few tips to help you on your way:
1. Look at newspaper classifieds, the Yellow Pages and internet search engines. Call nearby real estate agents. Add your name to local auctioneer's mailing lists.
2. Get a list of properties. Get as much information as possible beforehand from the auctioneer. Visit the properties; auctioneers generally have a preview date. Have any property you're interested in inspected by a qualified surveyor, if you can afford it. If you can't, take your most knowledgeable friend with you to have to take a gander at it.
3. Choose your desired property. Get its specifics: size, amenities, how much is owed on it, if anything, and what the opening bid is. Get pre-approved for a mortgage, if needed. Have your financing set up before you bid.
4. Compare the sales prices of similar properties in the area so you have a good idea of what it's worth. Prices for similar properties within three miles of the site are the most reliable.
5. A deposit may be due on the day of the auction. Some auctions may require bank letters of guarantee, banker's draft or a cashier's cheque in order to bid. Upon a successful bid, a deposit may be payable in cash, by certified or cashier's cheque, or by a personal or business cheque accompanied by a bank's letter of guarantee. You can't just turn up, bid and walk away; you've got to have cash to hand!
The remaining balance of the winning bid price is due X number days after the auction has closed. No purchase can be contingent upon financing. All purchases are based on the ability to close.
6. Check terms and conditions carefully before bidding. Not all terms are the same for every auction. There is no limit to the number of lots you can buy.
7. Check the auction time, date and venue. Go to the venue one hour before the auction time. You can meet on-site staff, confirm your registration and get any questions answered.
8. Mentally set your maximum bid. Don't get swept up in the excitement. Stay quiet if there are several people bidding on the same property; your bid will only escalate matters. When most have dropped out and the bidding has slowed down, you step in. You can avoid bidding up your own fee.
9. The first and second properties on the list go for the cheapest price. People are waiting to see what the other fella is doing. A couple of good deals go by before they realise they'd better get cracking. Their timidity could be your chance!
10. Penalties for backing out of a winning bid can be steep, so be sure of what you're getting into. Contact your lender as soon as possible after the auction to finalise your mortgage.
11. Property bought at auction is 'sold as seen', with no warranties, guarantees or disclosures. It's up to you to check it out beforehand.
12. Listen to the auctioneer before the auction begins. The bidding process should be be explained in detail.
13. Consider the additional costs of buying at auction; the auctioneer's fee, any liens or taxes owed against the property.
14. Realize that you're not obliged to buy anything. Walk away and be glad if the deal isn't right for you.
Auctions are a quick way to expand your real estate portfolio, or get your first house. Many people bidding will be professional. With a bit of research and preparation, you can be too!
