You may have noticed advertisements in the newspapers and on the airwaves for real estate auctions that are taking place in Arizona.
You also may have been tempted to attend one out of curiosity or maybe just to see if you could purchase a property at a below-market price.
Attending a property auction is an educational experience and if you intend to participate, you should fully understand the rules of the game.
Prior to most auctions, unlike foreclosure auctions, buyers have the opportunity to inspect the properties, which is a big plus.
If after an inspection you intend to bid on a property, it is wise to know the rules which can vary by auction company.
Ebay and home auctions have at least one thing in common. There can be a reserve price or no-reserve price.
No-reserve means the property will be auctioned off to the highest bidder.
If the property has a reserve price, the bidding may start below the actual price at which the seller is willing to sell the property.
If the bids do not exceed the reserve price, the property will not be sold.
Properties can also be sold subject to seller’s approval. This is common when a mortgage company owns the property.
They are usually not in attendance at the auction and you may have to wait a week or two to get the acknowledgment that they have accepted your bid.
In order to bid on auction day, you must have your earnest deposit in hand in the form of a certified check, usually no less than $5,000.
It is imperative that if you intend to finance the purchase, you should be pre-approved by a lender, however, some homes are auctioned off on the condition that it is a cash-only sale and you must show proof that you have the means to pay cash for the property.
It is important to note that almost all auctions require the buyer to pay a buyer’s premium.
This amount, generally 5 percent, is added to the purchase price and paid by the buyer. For example, if the high bid is $200,000, $10,000 will be added to the purchase price.
Watching people at property auctions is an interesting experience.
Bidders can get caught up in the moment and unfortunately, those who do without a business plan, frequently get taught a hard lesson in overpaying for properties.
Ray Pugel is a designated broker for Coldwell Banker Bishop Realty. Contact him at (928) 474-2216.