Keep your emotions in check just like when buying property in general. But here, it’s even more important, as the stakes are higher. When buying at an auction many times you don’t get access to the property or you haven’t seen the property before you’re buying.
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
- Research properties beforehand to check for tax liens
- Speak to neighbors about the property if you can't walk it yourself
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.
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 an auction, the reserve price is the price the owner can’t sell below, and this is often set by the lender or bank.
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