Saturday, June 13, 2009

House Auction

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You've seen them advertised in the newspaper and on TV, blaring ads about House Auctions. "Buy your home at a giveaway price." I have been privy to a lot of different ways to buy a home in the past 20 years, regular resale, new home, contract for deed, lease purchase, lease option, short sale, REO, foreclosure, sheriff's sale, and now the convention center auction. I spent the whole day, first registering, then taking my dutiful place in a ballroom filled with thousands of people, some totally clueless, some savvy investors. What hype, what enthusiasm! I walked into this large, brightly lit ballroom, filled with loud, high tempo music, 5 jumbotron screens filling the mind with pictures of Donald Trump, the real estate baron, saying now is the time to grab your piece of the American dream. There are 2 auctioneers, going a mile a minute with no less than 6-10 assistants in black tuxedos dancing in the aisles, blaring out bidders numbers, blowing whistles and other antics to keep the energy going. It truly has a circus atmosphere with lots to watch and take in. This is not a task for the faint of heart. Here are a few tips. 1. Do you due diligence. These homes are not always what they seem. They may be trashed, may be in bad hoods, may have structural issues. Get a title report so you know you are not buying into a lawsuit, having to pay back taxes, liens, or have years of Homeowner Association dues to pay. 2. The homes are not always advertised correctly. They may say they were previously marketed at $500,000, but where they get that information is anybody's guess. I have access to the MLS and the property I was after said, "Previously valued at $303,00." Even back in the day, it was never this amount. 3. The price you bid is not the price you pay. The auction company puts a premium on the property. This auction house was 5% of offer, in addition to your top bid. 4. Even if you successfully win a bid a lower price for the property, it doesn't mean you bought the property. Each property is listed at "Subject to..." This means subject to the REO management, bank, or seller approving the amount of the bid. You may not have met their minimal bid. However, they have 15 days after the auction to give your their minimum bid. Does this mean house auctions are bad? No, they have their place in the current housing market. As in all cases for the consumer, it's buyer beware.

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