When market are slow and foreclosures abound, inevitably there will be a
number of large real estate auctions. Holders of REO periodically turn to
auctions to help clear their inventories. The auction process is a good way
to attract a number of willing buyers and to assure sales of properties.
Should you, as an individual investor or home buyer, participate in this
process? You may think that bidding at an auction is for professionals who are
savvy to the ways of auctioneers and that a novice may get lost in the flurry of
activity at a typical bidding session. To some extent this is true. You do need
to know something about the way auctions are conducted. However it is even more
important to know the property that you are bidding on and what its maximum
value is to you. It is also important to exercise some self control so that you
do not get carried away in the pursuit of a popular parcel.
But that doesn't mean you should avoid auctions. Indeed, some of the best
bargains have been obtained at auctions, and by people with very little
experience in buying real estate.
Auction have long carried the stigma of property dumping. The general feeling
is that if you can't sell a property through normal channels, you put it up for
auction. Maybe this is a carryover from the special auction used at foreclosure
sales. However, public auctions are different. The method is commonly used for
such commodities as art works and agricultural products, and these sales
techniques often produce spectacular sale prices.
Generally, holders of real property resort to auctions because they think
that property will not increase in value over time and that waiting for a normal
sale is not worth the carrying costs. To that extent, the properties offered may
be had for bargain prices. However, knowledgeable sellers know that an auction
may produce the highest price possible for a property. They are hoping hat there
will be enough bidding activity from motivated buyers to result in a sale at
maximum value.
In reality, when a large number of properties are sold at auction, many do go
for prices above their market value. At same time, several sell for true bargain
prices. It depends on how much competition there is for each property.
For many properties, there is no way to tell how much they are worth. Their
original sales price, in the case of previously owned properties, is no guide in
a depressed market. You can make a determination, but it requires doing some
homework: inspection the property and checking with current sales of comparable
properties. If you are willing to do this background checking, you will be
prepared to bid intelligently for the properties you want.
From a real estate marketing standpoint , auction are major events. Unless
foreclosures are especially heavy, aution are not conducted frequently.
Therefore, you will need to keep apprised of upcoming auctions and be prepared
to act when they take place.
Auction companies know that attracting a sizable crowd is the key to
generating high sale prices. Consequently, a lot of effort goes into promoting
the event. Look for ads in the real estate section of the local news paper. Call
auction companies or institutions that hold REO. If an auction is planned, they
should be able to provide you with a brochure or list of properties. These
properties should be open for inspection prior to sale.
In areas where a lot of inventory is sold by auction, special publications
have developed to inform buyers of opportunities. These publications list
properties that are for sale by owners who have acquire the property through
foreclosure. You can subscribe to these services or purchase individual copies
of the publications.
You may prefer to operate through a real estate broker. Often, brokers can
earn commission if someone they register at an auction buys a property. Advise
your broker of your interest in property auctions and let him or her keep
you informed of upcoming opportunities. The broker will probably make it easier
to inspect properties before the sale.
A growing avenue for publicizing events is internet. A key word search will
reveal a host of auction companies operating throughout the country.
