Although buying a house at auction can save you money, beware of the pitfalls that can end up costing you more than you bargained for. Here are some things to keep in mind:
- Bidding at an auction entails competing with experienced people.
- Payment is most often made in cash.
- Checking out the house and title status will have to be done relatively quickly.
- Buying at auction entails paying any liens, foreclosure or pre-existing mortgage expenses in full [source: FrontDoor].
Are you ready to buy a house at auction? Here's what to do:
- Set up a mortgage plan before attending an auction. You usually have between two weeks and 30 days after your bid is accepted to pay.
- Look for auctions in your area. Check the classified ads, look up auctioneers in the Yellow Pages or search online. Check www.auctioneers.org, www.onerealtorplace.com or www.auctionweb.com for lists of auctions and auctioneers.
- Get a list of houses being auctioned from the auctioneer and decide which house you're interested in.
- Hire a real estate inspector to do the inspection. You will have to arrange an inspection date with the auctioneer. This is a critical step because you need to be apprised of any defects or problems before bidding on a particular house.
- Make sure that the title for the house is free and clear. A good auction company will be able to provide both a current title opinion and a lot survey. Keep in mind that the mortgage company will do its own assessment on the house before approving the mortgage and may refuse the loan if it discovers too many problems.
- Decide the maximum amount you want to bid, before going to the auction. Make that amount firm in your mind, so that you don't get caught up in the excitement of the moment and end up overbidding. Remember, once your bid is accepted, you are legally obligated to pay it [source: Crye-Leike].