6 Hot Tips To Help You Prepare For A Real Estate Auction

One of the best things you can do to hunt for properties is to attend a major real estate auction. And you will have a lot of fun at it too! Often a band is playing, food and drinks are served, and a festive mood prevails. The auction company wants to make potential bidders feel good. But beyond this display of cheer, the auction company is promoting one goal: Get every property sold at the highest possible price. Auctioneers get paid a percentage of the day's take, plus, perhaps, a bonus for exceeding a certain level of sales.

To find a bargain, don't get caught up in the festive frenzy and abandon good sense (as some bidders do). Instead, go to the auction armed with information. Prepare to walk out a winner - not simply a buyer. Here's how you can make that happen:

1. Always thoroughly inspect a property. During the weeks before most private auctions, the auction company will schedule open houses at the properties to be sold. If you can't visit an open house, contact a licensed real estate agent and ask for a personal showing. (Most auction companies cooperate with Realtors. If an agent brings a winning bidder to the auction, that agent will be paid a 1 percent or 2 percent sales commission.) Sometimes auction properties sell cheap because they are nothing more than tear-downs waiting for a bulldozer. Or, they may suffer any of a number of other problems. Even new properties aren't necessarily defect free. Check them out before you bid.

2. Appraise the property carefully. Even if free of defects, you can't assume value. You must figure it out by studying recent selling prices of comparable properties. Don't count on list price to guide you. Just because you buy a property 25 percent below its previous listing price doesn't mean you have bought at 25 percent below the property's market value.

3. Set a maximum bid price. Remember, you're looking for a bargain. Market value tells you what a property might sell for if fixed up and marketed by a competent and aggressive real estate agent. Market value does not tell you the price you should bid. Before the auction, set your maximum bid price. Don't let the auctioneer or one of his or her "boosters" excite, romance, bamboozle, or intimidate you into going higher.

4. Review the paperwork that will accompany a successful bid. Before the auction begins, review the property tax statements, environmental reports, lot survey, legal description, and the sales contract you'll be asked to sign.

5. Be prepared to pay the deposit. To become eligible to bid, register with the auction company before the auction begins and show proof of deposit funds (amount varies by auction). You then will be issued a bid card that will tell the auctioneer that you are an approved bidder. Without a bid card, the auctioneer won't recognize your bid.
 
6. Find out if financing is available. Often auction companies prearrange financing on some or all of their properties. If so, find out the terms and qualifying standards. If not, determine how much time the auction company gives you to arrange your own financing. Unlike most government agency property auctions, private auction companies typically do not expect their successful bidders to pay cash for their properties.