Buying A Home At Auction: Tips And Tricks To Guide You

Posted on: 19 December 2016

Buying a home at auction can be a great way to save. While many homes bought at auction do need some work, you'll still probably end up spending less on the house and updates than you would on a standard listed home. However, there are some intricacies to the real estate auction process that can make it challenging for first-time auction buyers to navigate. If you're looking to save big on real estate by buying at auction, following these tips will help.

Don't just look at foreclosures.

It is true that many foreclosed homes are sold by the banks at auction. However, if you only look at foreclosures, you won't be seeing a full representation of the auctioned homes in your area. Many families choose to auction off deceased relatives' homes rather than listing them. These homes are often outdated, but you can get them for a good price because the family just wants to be done with the process and get the house of their hands.

To find out about auctioned homes in your area, try looking in your local newspaper. Most list homes that will be auctioned off at least a week or two in advance. You could also call a local real estate agency and ask if they have a list they can email you.

Be flexible in your location.

Far fewer homes are sold at auction than by typical means. If you've narrowed your focus on a specific area, you may have to wait for years until a suitable home goes up for auction in that area. Try spending a Saturday driving around to the various neighborhoods in your locale. Instead of making a list of areas you wouldn't mind living in, make a list of those you don't want to live in. Keep an open mind when it comes to up-and-coming neighborhoods, and remember that neighborhoods that seem above your lifestyle may actually be affordable if you buy a home at auction!

Secure financing in advance.

You likely won't even be able to bid at most auctions if you are not already pre-approved for a mortgage. You're typically required to hand over the funds within several days of winning the auction. So start visiting banks and shopping around for mortgages well in advance, and bring your approval paperwork with you when you attend a real estate auction.

You should also shop around for homeowner's insurance well in advance of attending an auction, since you'll have to purchase a policy before the home is signed over to you.

Pay for the home inspection.

When you find a home you're interested in bidding on, contact the auctioneer a few days before the sale and make plans to have a home inspector come look the place over. This will cost around $300, so only do it if you're definitely interested in a home. The inspector will identify any issues that need fixing, which will give you a better idea of how much work and money you'll need to put into it.

Pick a budget, and stick to it.

You do not have to spend the full amount that the bank has agreed to lend you. In fact, if you're buying at auction as a way to save on your home, you may not even want to spend half of that amount! Set a budget before you start bidding on any homes, and stick to it -- no matter what. It's helpful to bring a friend or family member with you to auctions. Tell them your budget, and have them remind you of it if you get overzealous and are tempted to over-bid.

For more help navigating the real estate auction process or other options for real estate for sale, speak with a real estate agent in your area.