Today’s world is continuously striving for solutions at more incredible speeds and with fewer headaches. And the same is the case when buying property at an auction. That said, typically, purchasing one at an auction usually isn’t a complex process. The person who places the highest bid takes the spoils home, whether a seasoned investor, a first-time buyer, or a property developer.
However, we cannot underestimate the value of prior investigation when purchasing property at an auction. Usually, many things are hidden from the buyer, and investigating before the auction day will benefit you and protect your investment if you decide to purchase the property in question.
In the end, it will be a worthwhile investment of your time and effort to watch out for potential pitfalls from buying properties at auctions. While the attractive price might entice you into ignoring the investigation process, ensure that you don’t get talked into doing such a thing.
After all, the auctioneer will try to hide as many defects as possible to rid themselves of the property. So, without further ado, let us take a look at some things to watch out for when you decide to purchase a property at auction.
Investigate the property in advance.
As you won’t be allowed to view the property on auction day, investigating beforehand will allow you to fully identify the repair works the property will need when you buy it. Visit the property a couple of days before the auction day to look inside and outside.
Who knows, maybe the property has water damage that you will have to deal with later. After all, water damage repairs can be expensive and will add up to your initial investment in the long run. Your best bet is to contact a Water Damage Advisor to conduct an investigation and obtain an in-depth analysis of the property’s current plumbing situation.
Moreover, when you arrive at the property, try to be as friendly as possible with the neighbors. They might let you into some details that the auctioneer might have hidden from you!
Set a budget.
Decide on the maximum amount of money you’re willing to pay for a particular property. That said, auction properties usually go for a much cheaper rate than their market value. However, you must also add renovation costs and unpaid bills into your overall property purchase budget.
Moreover, you will probably have to acquire financing to fund your property purchase unless you have the cash. So, ensure how much money you will have to deposit and the acceptable payment methods so you can arrange funds accordingly. That said, ask the auctioneer if they take cash iva wire transfers as it is an easy way to transfer funds and can be done through your bank!
Remain aware of unwanted tenants.
When buying a new property or home, chances are you will move into an occupied house. However, for property purchased from an auction, it may already have tenants. But, you can always ask them to move to another home or location. If they don’t cooperate, you can legally evict them out of your property if you own it, of course.
Moreover, you can also take the legal route and ask your lawyer to serve them an eviction notice. If they don’t, you can take them to court. But, do your best to avoid the latter. After all, you would want to enjoy your new property, not deal with court proceedings and the fee that comes along with it.
Prepare yourself to pay outstanding bills.
Most auction properties usually come with unpaid water and electricity bills, which can quickly add to renovation costs and other maintenance fees. That said, usually, the bank will cover unpaid, outstanding bills; however, that isn’t a certainty.
Moreover, these unpaid bills could be in the upwards of thousands of dollars. So, don’t be shocked if you see such a thing.
Therefore, it is advisable to check with your utility office before you decide to purchase the property. Just provide them with proof that you’ve purchased that you are willing to buy the property, and they will give you the necessary details regarding the property’s outstanding bills.
Expert auctioneers suggest that potential buyers be present at the auction location well before the allotted time of auction. Doing so will allow you to tackle any changes before the auction starts. Moreover, arriving a few hours before the auctions will let you sit in the front row at the auction location.
After all, a front-row seat will ensure the auctioneer sees you when you hold up your bid card!
Ensure your bids are concise and clear.
When the auction starts, ensure that your bids are visible to the auctioneer. While some auction houses will provide you with a bid paddle so that the auctioneer can know you are placing a bid for the property.
When placing bids, don’t get carried away and try to remain with the budget you’ve set for yourself. After all, the bidding process will excite even the most seasoned property purchasers, and first-time buyers might feel the need to hold up their bidding paddle every chance they get!
If your bid is successful, you will be bound by the terms and conditions of the sale.
If your bid wins the auction, you will have to put pen to paper and pay while on the auction location. As the auctioneer bangs their gavel, you will have to follow all the terms and conditions of the sale and will be liable for the property’s insurance at the exact moment.
If you decide to pull out of the sale after the gavel falls, you will have to pay penalties and fines to get yourself out of the deal.
If you cannot bid yourself, ask someone to do it for you.
If you don’t want to reveal your identity, someone like an agent, middle man, or attorney can place the bids on your behalf. In addition, some auctions will provide you with the facility to bid over the phone. However, if you decide to place bids this way, the auctioneer will require a cheque for the deposit and written authorization from your side.
In the end, auctions, whether on-site or online, bring a certain level of excitement. However, you can quickly get carried away and blow your budget so that you can win the auction. If you’re not careful, one more bid can turn into 30, and you will end up overpaying for something that isn’t worth the money.
Moreover, there is always a chance that someone might outbid. So, learn to take your defeats. There will be other auctions where you can try your luck and hopefully succeed.