Buying a repossessed home is a way to affordably enter the housing market. Often, these homes can be purchased at up to 50 per cent below current market value. You can find these homes through a bank, or through one of the many agencies that repossess homes and sell or auction them to the general public. One of the best ways to buy a repossessed home is through a public auction. But, before you bid on your first house, here are a few things you need to know.
- Skill level:
- Moderately Easy
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Things you need
- Financing arranged before the auction
- Professional house inspector
Believe nothing. Agents and others have been known to misrepresent the facts when describing auction properties. Always check out everything, from the condition of the property to liens that might be encumbering it. Visit the property yourself and take an inspector with you if you are serious about it. Talk to real estate agents and consult with a title company, if possible, before committing to a house at auction.
Establish a bidding limit for each property and stick to it--even if it means losing the property. A property is only worth whatever it is worth to you. Know how much you are going to have to pay for repairs and renovation and set a hard limit on the amount you are willing to spend. Never disclose your maximum bidding price before the auction begins.
Do not provide the selling agent with any details about yourself, how much you are willing to spend or what you plan to do with the property if you have the winning bid. The auction agent is not your friend and will not look out for your best interests. Be vague when answering any questions.
Find selling prices for comparable properties in the area. Real estate agents can provide the most accurate comps, but they might not be willing to help you. Contact your local tax collector or county clerk to get the sales prices of homes in your area that recently sold. Websites such as realestateabc.com (see Resources) can also give you fairly accurate comps. Do not believe auction agents when it comes to comparable prices. Do your own research.
Get legal advice. A lawyer will charge you for his time, but the advice you get could save you thousands of dollars in the long run. If you know a good real estate agent or broker who will advise you, their counsel can be just as valuable.
Know what options are available to you as far as down payments and monthly payments before making your bid. Some auctions require that you make a full payment within a few days of the close of the auction, while other auctions allow you to finance properties through lenders that are approved by the auctioneer. Get payment details in writing before making a bid and make arrangements with your own lender ahead of time if full payment is required.
Tips and warnings
- Auction agents will often employ dummy bidders to bid up the price of a home to try to get you to spend more. Never assume that auction agents will play fair at a house auction.
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