Whether you are bidding online or in person, understanding how to research and prepare for auction and how to bid effectively during an auction will enable you to achieve your real estate goals.
Buying property at auction can be exciting and profitable, but it’s important to understand how the process works. Whether you are bidding online or in person, understanding how to research and prepare for auction and how to bid effectively during an auction will enable you to achieve your real estate goals. My company has spent years investing heavily into auction technology that operates within changing market conditions as well as the expertise of more than 1,000 knowledgeable and experienced real estate professionals active throughout the United States. I, myself, have been attending auctions for years. Here is a compilation of the most important components of making the auction process work for you:
Before You Bid: Research! Research! Research!
Did I mention the importance of research? Learning about the property you are interested in is the first step to becoming a successful bidder. Use online resources to find a property and understand the ins-and-outs of the property prior to auction. Use sources that are not afraid to provide detailed information, including:
- Photos of the property
- Plat maps
- Preliminary title reports
- Property inspection report
- Estimated value
- Estimated debt
- Opening bid
Also, during this time, you want to understand the legal parameters for the county you are buying property in. A good online auction site will offer customer care to help you understand, in advance, what is expected of you in a certain county and help you check for payment requirements. It’s vital to understand the payment requirements as they may vary on a county-by-county basis. Some counties require 100 percent of the funds payable at the time the bid is won, while others require a certain percentage with the remainder due by a specific time. This information can also be found on the property detail page. To purchase, you’ll want to have cashier’s checks or certified funds.
We strongly urge our investors to bring checks in multiple denominations, so you can get as close to the purchase price as possible. You can then redeposit the unused checks. Also, be prepared to show a current government issued ID for contract writing purposes. Cash is not recommended for safety reasons and if a sale exceeds $10k in total, IRS requirements must be met. An auction website should have the details ahead of time about to whom to make the check payable and any additional details regarding the requirements for the sale.
Preparing for Auction
At a glance, due diligence encompasses your title search on the property, researching comparable properties nearby, conducting a visual inspection of the property (as the property may be occupied) and estimating the after repaired value (ARV) and renovation costs. In many cases, liens and encumbrances are nullified by the foreclosure process but this doesn’t happen everywhere. In some states they become the responsibility of the new owner in part or in full.
You must be aware of these obligations to evaluate your investment correctly and determine how much you are willing to bid. Also, be sure to track properties of interest so you will know in advance if they are postponed or cancelled prior to auction. Whether you are looking to buy-and-hold or fix-and-flip a property, a good customer care team should provide assistance in helping you conduct your due diligence and prepare for auction.
Auction Day: Time to Bid!
It’s auction day! Your nerves may be rattling, and you may have butterflies in your stomach, but you also have a portfolio full of research and a strategy ready to be put into action. Now, where do you go? What’s next? Confirm in advance where you need to be and what time the auction starts. Auctions are typically held at county courthouses or other public venues and are free to the public. Your online auction website should post event details regarding the time and place of the sale. (Please note, some sales are held online depending on the county or state).
For example, auctions may be conducted by an auction service (like Auction.com), a trustee, a referee, the county Sheriff or a different officer of the court. This varies by county or state. As you prepare to head to the auction, be sure to verify your property of interest is still scheduled to be auctioned. Properties can be cancelled or postponed at the last minute. For instance, the homeowner may reach an agreement with the lender or file for bankruptcy. Auctions can last for hours, so be sure to check the weather and dress appropriately. You may also want to bring water, snacks and a chair. We also strongly advise you to arrive early.
This gives you plenty of time to show proof of funds (if applicable) and register for the auction. Although registering is not always required, this facilitates the contract-writing process if you are the winning bidder. You will be given an auction bidder card (if applicable) to use during the auction. Once bidding begins, be prepared to move fast! Auctions operate at a fast pace, so you’ll want to follow the provided property list for your property of interest to keep you informed of its order in the auction. Within minutes, you may become the owner of a property… Congratulations!
After you have won the bid and finished basking in the glory of your newfound success, there will be a contract writer ready to write your contract. At this time, you will also tender your funds and provide your government issued ID. After this, you will be given a certificate of sale receipt at the auction and the deed will be mailed to you.
Post Auction: Next Steps
When you receive the deed, it is your responsibility to have the deed recorded and negotiate the exit of any occupants from the property, if applicable. You may want to contact a real estate attorney for assistance on bidder’s rights and other local statutes to follow to obtain possession of the property. Once the property is vacant, you can make keys, inspect the property, and begin any renovations
so, you can occupy, fix-and-flip, or rent it. With your first home under your belt, you are ready to bid on more homes and add to your real estate investment portfolio. Happy Bidding!