How would you go about buying a house at an auction? First step? Don’t read this article, and if you do, ignore most all that it says: https://www.bankrate.com/mortgages/how-to-buy-a-house-at-auction/. This article is absolutely full of misinformation about auctions generally. Let’s start with several noteworthy corrections:
- Do most “house” auctions result from owner/borrower financial difficulty? It might be unfair to suggest “most” do not, as some do, but there are plenty of houses (real properties) that sell voluntarily (non-forced sales) in all parts of the United States every day.
- Do all real property auctions have a minimum bid or reserve? They do not. There are many real properties that sell absolute to the highest bidder and many others which have very low (reasonable) minimum bids.
- You probably can’t inspect the property ahead of time? Many auctions of real property allow for pre-auction inspections and certainly, some non-forced sales involve the opportunity to inspect prior.
- You can buy real property below market value? You certainly have the chance to do that, but actually, almost all non-forced sales result in exactly market value, and many report non-forced sale prices exceeding expectations.
- Do you have to pay cash? You usually do not have to pay cash, and most any real property auction can be financed, although most are not “contingent” upon financing.
- You have to investigate title issues? You usually do not. Almost all real property auctions (and even some forced sales) provide clear or marketable title.
- You have to pay outstanding liens? You usually do not. Almost all real property auctions (and even some forced sales) provide clear or marketable title.
- You have to pay for the property immediately or within hours of the auction’s completion? You usually do not. Almost all real property auctions (and even some forced sales) allow ample time to search title and produce funds to close.
- If your cashier’s check is for more than the purchase price, the auctioneer will return any excess weeks later? First, a cashier’s check is normally not required, and it doesn’t take weeks to get a refund.
- The “previous” owner can redeem the property even after the auction? Almost all real property auctions (and many forced sales) transfer legal title when the purchase price is paid in full.
- The seller can participate in the auction? In a with reserve auction, or any forced sale, the seller can bid (with disclosure.) Otherwise in a without reserve (absolute) auction, the seller cannot bid.
- At auction, you’re buying a “first” or “second” lien? That’s usually not true (unless it’s clear that’s the case,) and rather you are buying the real property, and necessarily not a lien position.
It appears that the article’s author, Erik J. Martin, was referring solely to forced sales (foreclosures, repossessions, and the like.) The rules are typically different in these circumstances such as fewer inspection opportunities, payments due quicker, and possible latent (title) issues.
However, the title to his story was “How to buy a house at auction” and the answer to that question is not “You have to buy it at a foreclosure sale.” There are lots of other ways to buy houses (real property) with inspections, traditional closings, and clear title.
Want to buy a house, farm, land, ranch, commercial building, industrial site, or other real property at auction? Reach out to your local auctioneer or search the Internet otherwise to see the vast opportunities that exist.
Lastly, if you want to know “How to sell your house (real property) at auction” contact your local auctioneer. If you want to learn all you can about real property auctions, consider taking the Accredited Auctioneer of Real Estate designation class sponsored by the National Auctioneers Association.
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.