How to Prepare for a Real Estate Auction
The traditional route of buying a home isn’t always a good match for every home buyer. Some buyers want to experiment with how they find and purchase homes, and some may even want to try going to a real estate auction. Auctions can be a good way to purchase a home for less money than it would be otherwise, so they’re popular among people who are looking to save money. However, because real estate auctions are so different, buyers need to prepare before arriving at the auction house. Here is an introduction to what buyers should know about real estate auctions before they try to bid on a new home.
Decide a Maximum Budget
Just like if a home buyer is purchasing their home in the more traditional route, home buyers who are going to an auction need to decide what the most money they’re willing to spend on the home will be. Having this number in mind ahead of time can help buyers stay within that budget. During an auction, it can be easy to get caught up in the excitement and only focus on winning the auction instead of the price of the home. No one wants to leave an auction with buyer’s remorse, and keeping a budget in mind can be helpful if a bidding war occurs.
Find and Register for an Auction
In the age of modern technology, real estate auctions aren’t always done in-person. Home buyers can attend online auctions and bid on homes from the comfort of their own home—similar to bidding on items on websites. However, if the buyer wants to physically attend an auction, they should try asking local real estate agents, as they often know where and when auctions are held, and they will be happy to share that information.
In order to take part in an auction, the home buyer will need to register, whether this means making an account on the auction website or filling out forms at the auction house. The people behind the auctions want to know the general information about who is attending their auction and how to contact them if they win a bid, so it’s important to make sure all the information is accurate.
Get Pre Approved for a Loan
If the buyer isn’t paying for their home in cash, then they’ll need to get a loan. It’s always recommended that buyers get pre approved for their loan before attending any auctions for bidding on any lots. Getting pre approved for a loan gives home buyers written proof that they’ve contacted a mortgage lender and have been approved after having their financial history examined. This process typically takes a few days to complete, so having it done ahead of time upon winning an auction makes the buyer look more reputable. It also helps make the closing process faster because the waiting period has already gone by.
Learn the Types of Auctions
Before making a bid, the buyer needs to know which type of auction they’re participating in. There are three different types:
- Absolute auctions: A traditional auction—the highest bid wins the home. Absolute auctions are common among foreclosures.
- Minimum bid auctions: An auction where the home will only be sold if the bids meet a pre-determined minimum bid.
- Reserve auctions: The winning bid is given to the seller as an offer ,and they may decide if they want to sell or keep their property.
The type of auction can potentially change how a buyer strategizes their bidding, so it’s important to be familiar with them ahead of time.
Real estate auctions can be an exciting way to buy a home, but they come with a lot of learning for first-time auction goers. This can be a helpful starting point for getting into auctions, but buyers should read up on the subject as much as they can before attending one.