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Navigating Real Estate Auctions

It's a good idea to keep your emotions in check just like when buying property in general, but in a real estate auction, it’s even more important, as the stakes are higher.

Most auctions are for foreclosed properties, so these are also properties that might not be in the best condition and will require a lot of money and work to fix up. So the bidding price at the auction must take this into account. Let's look at some real estate auction tips below:

When buying a property at an auction many times you don’t get access to the property or you haven’t seen the property before you’re buying.

Usually, when you buy a house or condo via an auction it's site unseen - as in you can't walk through the property and see what condition it's in, you migt only be able to sneak a look through the windows or the backyard.

Emotions and the competitive nature of an auction can creep up on you.  Try adhering to a number.  Have your business partner or spouse hold you to it.  Wrestling you to the ground if need to prevent you from rationalizing another bid.  If you keeping bidding before you know it you're stuck with a property that's already lost value.

There’s an art to bidding at an auction, just like in negotiating to buy a property directly from an owner, but in this case it’s in a smaller window of time let’s say.

  • Pre-qualify as bidder
  • Set your maximum bid you're going to make before the auction starts
  • Research properties beforehand to check for tax liens
  • Speak to neighbors about the property if you can't walk it yourself
  • Don't let your emotions get the better of you when you're bidding for the property - there will be another auction or change to buy a property

Some auction goers have their own style, those who bid high early on and weed out the known investors.  While others wait until the later stages to make a bid. But this is a fast game where bids are made quickly. Perhaps a good strategy is to go to an auction where there are five or six properties you hope to bid on - so you have a few options to choose from.

Many times, in an auction or foreclosure, a deal won’t go through, so you can fill out a form listing your offer as the backup bid.  Sometimes someone who's won the bid will fail to qualify for a loan at the last minute or their money falls through.  The winner bidder has a certain period of time to come up with all the money--and that could fall through, that's where your back up bid comes in.

Reserve price – in a real estate auction, the reserve price is the price the owner can’t sell below, and this is often set by the lender or bank before the auction begins.

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