Steps You Should Take before Going to a House Auction
Posted on: 7 April 2016
Houses can be auctioned off for a number of different reasons; however, this often happens when lenders foreclose on homes. Buying a house through an auction can be a great way to find a house that is priced well under the current market value, and this is one of the main reasons people buy homes at auctions. If you are looking for a house to buy and are considering buying one through an auction, it's important for you to complete a few steps before you actually start bidding on it. Here are some of the most important steps you should take.
Find Out the Rules and Requirements for Bidding
All auction companies have different rules and requirements when it comes to attending and bidding on homes they are auctioning off. Here are three common rules you should find out before you plan on attending an auction:
- Prequalification requirements—Most auction companies will not let people bid on homes unless they are prequalified to buy a house. Getting prequalified will involve going to a bank and filling out the necessary paperwork. If you meet the lender's requirements, you will be prequalified to purchase a home up to a certain amount depending on your income, etc. You may need to bring this letter with you when attending the auction.
- Down payment rules—The company hosting the auction is also likely to require a certain percentage as down payment. This percentage is usually between 5% to 10%. You can find out what this amount will be before the auction, and you may need to go to your bank to get a cashier's check to bring with you to the auction.
- Type of auction—In addition, you may want to ask what type of auction it will be, as there are three main types. A reserve auction allows the company to reject your bid if it is less than the reserve price. With an absolute auction, you will win the bidding as long as you bid the highest. A minimum-bid auction is the third type, and requires a starting bid amount that you have to bid over if you want a chance to win.
When you find a house you are interested in buying and find out all the rules and requirements for participating in the auction, you will be ready to move on to the next step.
Research the Home Thoroughly
Researching the house before you bid is the second step you should complete, and this is necessary to make sure you know exactly what you are buying. There is a good chance the auction company will not open the doors to the house they are auctioning, which means you will not get to walk through the house and see exactly what it looks like. You can look through the windows, though, and you should. You can also look at the outside of the house and walk around it to see its condition. The condition of the outside of the home may tell you a lot about the condition of the inside; however, it will not tell you everything.
If possible, you may want to bring someone knowledgeable in construction with you to view the property. This person might be able to point out things you would not have noticed on your own.
In addition, you should research the title of the home before you buy it. When buying a house through an auction, you will not only get the house if you win the bidding; you will also inherit any problems, liens, or unpaid taxes that come with it. You can find out if a house has liens or unpaid taxes on it by looking up the title of the property at the local courthouse.
Come Prepared on Auction Day
If you are prequalified, love the house, and have fully researched it, you will be ready to attend the auction. Make sure you gather all the necessary paperwork you need, which will include your ID card, prequalification letter, and check. You can then attend the auction and begin bidding.
Buying a house through an auction is a great way to get a deal on a home. If you are interested in this, contact an auction company to find out what homes will be auctioned off and the rules relating to the auctions.
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