Steps to Buy Online Real Estate Auctions

What steps does a real estate agent take to purchase a property?

    • Get pre-approved for a mortgage.

      Typically, you will have two weeks to 30 days to close. The first thing you want to do is make sure your lending source will be willing to lend you the amount of money you will want to buy the property for at auction. You don’t want to wait until after you make the winning bid before you obtain approval for a mortgage loan.

 

    • Set up an inspection.

      Once you get a list of properties that will be up for auction soon, visit the ones that interest you and arrange for inspections of the ones you would consider buying. Hire someone to inspect thoroughly each property you’re interested in. Unless you’re rich, you will have to be selective because each inspection costs money. You can ask the auctioneer to allow an inspector onto the premises days or weeks before the auction, or you might have to wait until the day of the auction. Experts agree that you shouldn’t skip this step. It bears repeating that you buy a property at auction as is, defects and all, and it is up to you to detect problems before you bid.

 

    • Ascertain with the auctioneer that the property has free and clear title.

      An organized and thorough auction company will have a written, current title opinion showing the property is clear and a lot survey showing any encroachments prior to the sale for all to review. Before a lender will give you a mortgage, it will assess the property. Hidden defects can lower the assessment to the point that the lender will refuse to give you a mortgage.

 

    • Decide on your maximum bid.

      Zero in on the property you want and decide on your maximum bid. If you come to a real estate auction with a maximum figure in your head and you know not to spend any more than that figure, you can be safe. You just don’t want to be caught up in the excitement and overbid your limits.

 

    • Bidding.

      If you’re looking for a home to live in, you could be at a distinct disadvantage at an auction because you’re bidding against experienced investors who might plan to fix up the house and sell it. Their experience gives them an edge, but you have an advantage, too. You’re looking for a house to live in, so you can probably bid higher than someone who is looking for a fast profit.

    • Make Winning Bid and Meet Seller’s ConditionsYou have to pay a deposit (the same as earnest money). The deposit price varies with each auction house, usually ranging between 10-25%.You might have to pay a buyer’s fee to the auctioneer, typically 10%. This is similar to the commission paid to a real estate agent, except that the buyer, not the seller, pays this fee when a property is sold at some auctions.The seller will want to close the sale within 14 to 30 days.

Key Differences of an Auction Purchase

Buying a house at auction is quite different from buying a house the conventional way through a private sale. Here are some key differences:

  • There are no contingencies. You cannot simply withdraw the winning bid because you cannot get a mortgage or you cannot sell your current house in time.
  • If you back out, even for a good reason, you could be liable not only for the earnest money (usually 25 percent of the high bid in most auctions), but also for damages which are clearly stated in the signed contract you were required to sign on auction day.

With all the worries and requirements that accompany buying a house at auction, it’s no wonder that it’s the road less traveled. Buying your house this way requires patience, persistence and risk-taking – but not foolhardiness.

Common Auction Terms

ABSENTEE BID
A method of bidding in which a person who will not be attending the auction completes a form indicating the lots she wants to bid on and the amount she wants to bid. The bids are then executed during the auction by a staff member who bid competitively on behalf of the absentee bidder.

ABSOLUTE AUCTION
An auction at which lots are sold without reserve.

AS IS, WHERE IS 
This phrase means that you are purchasing the item as it is. If it is scratched, broken, incomplete, or won’t work, that is the condition in which you buy it. If you discover damage after bidding but before you check out, you are still expected to pay for and remove the item. If you discover damage after paying for the item, no refunds are given for any reason. In other words, preview, preview, preview!

BID
An offer of a price.

BIDDER’S CHOICE
A bidding method most often used when there are several identical or similar lots being offered, for instance bookcases or, in the case of real estate, three adjacent parcels of land. When the Auctioneer announces that he will be selling a group of lots using bidder’s choice, it means that the high bidder will have the chance to take any or all of the lots in that group, each at the price of the high bid. For example, there are five lots of matching bookcases being offered bidder’s choice, and the high bidder bids $100. That bidder can take one for $100, all five for $500, or anything in between. If there are any lots remaining after the high bidder chooses, they are offered to the rest of the bidders until all are sold.

CLIENT
The entity with whom the Auctioneer has contracted to sell property; it is often synonymous with “seller” and “consignor.”

CONSIGNOR STATEMENT
A detailed accounting of a seller’s items, including a list of the auctioned lots, the prices they were sold for and the commission taken by the Auctioneer. Absolute Auctions sends out consignor statements with payment 30 days after the auction.

LOT 
A single object or a group of objects offered for sale as a unit.

RESERVE
A reserve is a minimum sale price set for a lot. For example, if a seller does not want his item to sell for less than $50, then $50 would be the reserve for that lot. With few exceptions, Absolute Auctions sells unreserved antique & estate merchandise.

SUBJECT TO SELLER’S CONFIRMATION
An auction where the seller has the right to accept or decline the high bid. At Absolute Auctions, this is most often used for vehicle and real estate auctions.

TERMS AND CONDITIONS
These are the governing rules for a specific auction. Each auction’s terms and conditions may vary and the bidder must understand them before participating in an auction. Participation in the auction indicates agreement to the terms and conditions.

Bidding and Paying

Rules about bidding and paying

You can’t use Auction4Deeds if your account contains false contact information.
Buyers and sellers sometimes need to be able to get in touch with each other, and we need to be able to contact our members.

You must pay for any item you commit to buying.
Some Auction4Deeds sellers use an auction-style format, allowing you to bid on an item. Bidding is fun, but keep in mind that each bid you make is a binding contract to buy the item if you win. The same is true for Buy It Now purchases. Not paying for an item after you agree to buy it has negative consequences, explained in our unpaid item policy.

You can only bid if you really intend to buy the item, even if you’re making a non-binding bid.
You can only make non-binding bids on certain items, such as real estate and vehicles. This type of bid still means that you intend to buy the item. The bottom line is, don’t place a bid unless you mean to buy the item.

You can’t bid on your own item.
We call this shill bidding and it not only violates our policies, it’s against the law in many places.

Be careful about bidding on several items if you only want one.
If you’re the winning bidder of more than one auction-style listing, you need to purchase all the items you’ve won, even if they’re the same or similar.

You can only retract a bid under specific circumstances.
For example, if you meant to bid $10.00 but accidentally bid $1,000.00, you can retract the bid. Even then, you need to bid the amount you originally intended immediately. Never use bid retraction to manipulate the bidding process. Bid manipulation is unfair, and it has serious consequences. Learn more about retracting or canceling your bid.

Make sure that you read the listing description before you bid.
Many of the problems buyers and sellers encounter are the result of simple misunderstandings about what is for sale and the terms of the sale. For example, some sellers only want to sell to bidders who live in a certain country, or who will pay using PayPal. Only bid on or buy an item if you can meet the requirements described in the listing. If you bid on an item and you don’t meet the seller’s requirements, we consider that unwelcome and malicious buying.

If you know the seller, you can’t bid on the item with the intent to increase its price or desirability artificially.
This rule applies to family, friends, roommates, employees, and online connections.
Buying items from someone just to increase their Feedback score or improve their search standing is called shill bidding, and it’s against our policies.

You can’t offer to buy items outside of Auction4Deeds.
Our policies don’t cover items bought outside of our site. If you buy items outside of Auction4Deeds, we don’t protect you against fraud. Sellers must follow the same rule, so if a seller offers to sell you something outside of Auction4Deeds, don’t accept the offer. For more information, see our rules for everyone.

If you buy an item from a seller in another country, you can’t ask the seller to mark the item as a gift in the customs declaration.
This is illegal, and against our policies. Learn more about our rules against encouraging illegal activity.