6 Tips For Purchasing At A Real Estate Auction
You’ve made the decision to jump into real estate investment and you’re now looking for a property. This sounds a lot easier than it really is. Especially if you’re in a seller’s market, finding something in such a competitive market can be next to impossible. In comes the real estate auction. This is one part of real estate that really levels the playing field for everyone and anyone who wants a certain home can buy it.
That being said, you should take the following 6 things into account before you buy a property from an auction.
1. Speak to Your Local Bank
A lot of homes that are sold at auctions are foreclosures. This is because lenders want to sell the home quickly and get as much of their investment back as possible. Depending on equity in a home, you can find some amazing deals. Speak to a local bank and tell them about your interest in getting an investment property. There’s a chance they’ll let you know of any foreclosures available that are about to be auctioned off.
2. Get Versed in Local Real Estate
Not being familiar with the local real estate market could spell doom for you. You won’t know what’s a good deal and what is. Yes, auctions are great because you don’t have to haggle on price with an owner, but this can work against you if you’re not versed in what a particular home is worth in its exact condition. Take some time, visit some local listing sites, and consider going to local open houses in order to get a good idea of what homes are going for in the area.
3. Get in Touch With Contractors
Auctioned homes are usually sold as-is, which means you need to know any problem areas and how much you’ll have to pay to fix and upgrade. For example, if the pool is in terrible shape, how much will you have to pay to fix it up? Get in touch with some local contractors and get some general estimates on items you may anticipate coming across. Once you get that home, having a good team behind you will help out big time. Also, it will give you a good idea if the “good deal” at the auction really is one.
4. Get Familiar With How Auctions Work
An auction is totally different than using a realtor. Auctions can either be instant/real-time or they can occur over a few weeks with minimum bids set or online bids. The auction stops when the highest bidder is found. Most likely, you’ll have to pay immediately, which means you’ll need to have financing set up. Make sure you talk to the auctioneer beforehand so you know the specifics.
5. Determine After Repair Value
If you’re trying to get funding from lenders, make sure you know that you can usually get only 65-80 percent of a home’s after repair value. You’re going to have to make up the rest of it with a down payment. This is why you need to know the local market and what the home will be worth after you fix it. That way, you’ll know if the home you want to big on is a good deal.
6. Check out the Property!
Since the home is likely foreclosed, you won’t be able to enter it and determine its inside value. That being said, if someone couldn’t afford the mortgage, chances are they couldn’t afford repairs either. That being said, if you at least check out the home’s exterior, you can still get a good idea of its condition. Also, if it’s an older home, you’ll know that you’ll likely have to make some more major repairs.
If you need any help finding the right investment property for you, let me know! Call me at (510) 304-2121!