Buying a home at auction can be a great way to purchase a property under market value. It may need some TLC, but the price often makes up for the cost to rehab the home.
Why is a home sold at auction?
When a bank forecloses on a home, they take back the property (a repossession) and then must resale it to recoup their loss. They appoint a "trustee" (usually a lawyer) to manage the sale of their foreclosed homes and that trustee auctions the homes off either in their office or at the county courthouse steps.
How is an auction different from a regular sale?
First, it's a quick sale. The list of homes up for auction comes out in the afternoon, you bid the next morning and if you are the winning bidder you get keys the following day. Second, the seller is always paid in cash and there is no negotiation on price or terms, just bidding on final sales price. Next, it's an AS-IS sale, meaning the seller will make no repairs nor give any credits towards condition issues. No home warranty will be issued. As well, you have no inspection period, so it's recommended to preview the property in person, and if possible, get inside the home to make your own inspection of it's condition prior to the sale. This isn't always possible, and that's part of the gamble of an auction.
Can I go to the auction and bid on a house myself?
Certainly, although many people find the process intimidating and therefore much easier if they use an intermediary who is familiar with the process and has experience bidding. The cost for this type of service is a fraction of a typical real estate commission.
Auctions are all-cash sales: How to buy using Conventional Financing
Homes bought on the auction block must be paid for in cash within 24 hours and require a $10,000 deposit paid immediately after winning the bid. This doesn't mean you must have the total purchase price in cash - but if you intend to finance the home you are buying, you'll need to be pre-approved for a home loan prior to winning the bid AND you'll need to be hooked up to a "hard money lender" who will provide the total purchase price to you in cash in order to buy at auction.
The Desert Fairways Advantage
We work with investors who regularly buy homes at auction. Our expertise can help save you time and aggravation in buying homes at auction. Ask your Desert Fairways Realty agent about the DFR Investor tool and see how we can help you!
Desert Fairways Realty highly suggests reading the privacy policies of any website requesting personal financial information such as an on-line pre-qualification form, and we cannot guarantee your information will be kept confidential if requested by anyone or when given to anyone outside of our company. Desert Fairways Realty does not share your personal information with anyone outside of the sales transaction, whatsoever. We are not a financial institution and cannot give advice on financial matters, loan products, etc. We make no guarantee as to your ability to secure a loan or particular rate. We suggest shopping multiple lenders to obtain the most favorable rates and terms. Loan Rates and fees rise and fall and will be more or less favorable over time depending on many factors in the economy and your personal credit history.