If you want to make a bid on a house that is going up for auction, you can do so even before it goes public…but not without doing some serious homework first.
By buying before the auction, you can actually save the seller some serious money, savings which could be passed on to you. Marketing and auction costs could be lower for the seller; the auction house’s fee can sometimes be just as much as a real estate agent’s commission (usually 5-10%). As Bankrate’s Steve McLinden points out, you have every right to contact the seller or seller’s agent before the auction to determine the sum of the home loan, but by doing a little reconnaissance, you can learn more about the property and maybe even save some money with your bid.
Many homes in this stage are still viewable to the public in the weeks prior to the auction. Some may have written reports available providing information about home inspections, property surveys and other important details. Look into these and find out anything you can. Although most of these homes are transitioning into foreclosure (or are already there), you can still make a solid attempt at learning more about the investment you want to buy.
You should also be sure to check for any liens against the property. Check for tax liens, contractor liens, association dues and other debtor liens–you don’t want to be responsible for settling them. Invest in a title search. It’ll be money well spent and you can rest assured knowing you won’t sign yourself up for any extra hidden debts.
McLinden highly recommends enlisting a buyer’s agent experienced in pre-foreclosures, foreclosures and auctions. He or she can then guide you through the steps to bidding before an auction, and make sure the bidding and buying processes run smoothly. As a buyer, you definitely have the negotiating ball in your court. You know the seller is motivated and needs to sell soon. A pre-auction offer from you is a great thing for the seller, who won’t have to worry about no one attending the auction come auction day. An experienced agent representative can help you traverse these sometimes tricky waters.
Make sure you have the money lined up to pay for the house quickly, either with cash or financing set up through preapproval from a mortgage lender. Be prepared for another interested party to step forward after you bid, a phenomenon Bankrate calls “shopping a bid.” To avoid this, make your bid available for only a short period of time in efforts to lock down the sale.
If you don’t end up with the home, you can definitely show up to the auction with another offer in hand. But, hopefully, by following these steps and advice, you will have your transaction in the bag before auction time hits.