Buying auction properties is one way to increase your investment property holdings. By buying property below market value and possibly at a deep discount, you can increase you net worth and build wealth. There are many types of auctions that have real estate available for sale:
- Tax deed or Tax lien auction
- Government property auction
- Bank or Lender owned (REO) property auction
- HUD auction
- County property auction – foreclosures
Due diligence is the key before bidding on any auction property. Knowing the rules and guidelines of how a property can be viewed and inspected must be followed to participate in the bidding process. Some properties will only have a few hours available for inspection prior to the bidding. HUD homes may be listed on the MLS and a more thorough inspection can be done. Usually the bidding is open to primary home owners first for a specified time then the property is open to all bidders. Be wary of any property that you can not personally inspect. The best scenario would be to have a professional home inspector and/or a contractor accompany you to give you unbiased opinions on the condition of the property as well as the cost to repair any deficiencies.
Make sure you understand the process to finalize and accept the terms of the auction house for acceptance of a winning bid. This is especially true for online bidding. Original documents and contracts will have to be submitted in a timely fashion.
Talk to mortgage companies about their procedures for lending on property bought at auction. The time frame from getting your bid accepted to providing payment in full to the auction house could be only 30 days. Pre-approval and getting the loan process in full gear is essential. Cash deals are always the best and be mindful that some property auctions are cash only deals!
Also, it is important to know the real estate market that the particular auction property is in. Knowing the values of like property, the trends of market value, zoning issues, rental rates, taxes, etc should help you set a ceiling for the maximum bid to place on the property.
If you are a novice to buying auction properties, attend auctions to get a feel of how they work: the pace and procedures. Ask questions – from experienced investors to the company or government agency that is conducting the auction.
Don’t forget to analyze the benefits of buying an auction property.
