Buying a home at auction has been a growing trend, even though it just a small percentage of residential sales. Since the recession in 2009, buyers have seen auctions become more frequent and have noticed that this is a faster, simpler way to buy a home. It does come with some risks to the buyer, as most of these homes are sold “as is” with little time for inspections, personal or professional.
There are 3 types of auction
1. Absolute Auction. This is also called an Auction without Reserve or a No Reserve Auction. There is no minimum bid, and the property will sell for the highest bid no matter what that price may be. This type of can generate higher-than-market value prices, but buyers love the excitement of the possibility of a great deal on the home of their dreams.
2. Minimum Bid Auction. The home has a minimum price, and that baseline is advertised well in advance of the sale. This is often a less volatile type of auction, bringing out committed buyers but not the big gamblers, and the buyer knows in advance which homes are within their budget.
3. Confirmed Bid Auction. This is also called a Reserve Auction. There is a minimum price, which is not advertised. The highest bid must be approved by the seller as being acceptable before the sale is final. The least popular for buyers, this type of auction can be frustrating for buyers who have placed the winning bid only to be told it wasn’t enough.
Buyers at auction are responsible for closing and title costs, and must often place a deposit or “earnest money” with the auction house before the sale. Homes are sold in current condition, so unlike a traditional sale where buyers can ask for contingencies (issues fixed at the seller’s cost), all repairs or updates are the buyer’s responsibility.
Auctions are fast, and sellers are motivated. There’s no drawn-out negotiations and the price of the home is determined by what you feel it’s worth to you.
The Due Diligence paperwork will hold a great deal of information about the home at auction, and you can schedule ahead to bring an inspector with you to the auction if you can find one that’s willing to do so under pressure. You know the date of sale and closing, and can expect an expedited process. You can go from auction to having the keys in hand in under a week!
Auctions are fast, and the price you’ll pay is uncertain. If you need to plan ahead for big decisions, this may not be the home-buying process for you. You have to be pre-qualified to participate in an auction, as the auction house wants to be certain you can pay the price you bid. You can easily fall in love with a home, only to watch it sold right in front of you to someone with deeper pockets.
Who should consider an auction?
Auctions are particularly attractive to buyers who need a home quickly, are sure of what features and neighborhoods they want, and are financially ready to buy. Unsure if an auction is the right sale for you? Contact The Columbus Team today, and we can help you decide if a traditional sale or an auction will best meet your needs as a buyer.