Buying a Home at a Real Estate Auction? What You Need to Know

Everything to Know About Buying a Home at AuctionMost Ramsey County homeowners choose to buy their home by looking at listings online and then making an offer through their real estate agent. However, some homeowners choose a different path to buy a home: they buy their house at a real estate auction. Real estate auctions can be a way to get a house at below-market rate. If you’re going to a real estate auction, it’s important to do your research and know what to expect throughout the process. Here’s what you need to know.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

What Kinds of Homes are Sold at Real Estate Auctions?

Any kind of home can be sold at a real estate auction, but most of the time, homes sold at auction are foreclosed properties. A foreclosed property is a home that is owned by and sold by the bank, because the most recent occupant defaulted on their mortgage. Banks tend to sell properties through auction because they don’t want the hassle of a traditional real estate sale. 

This means that most homes sold through real estate auctions are distressed properties. Homeowners who don’t have the money to pay their mortgage typically don’t have the money to make basic home repairs or keep up with the appearance of their home. Often, homes sold at auction often need extensive work in order to be brought up to their potential.

Home buyers who want to purchase a home at a real estate auction should be ready to put a lot of effort into the repair of their future home. It’s helpful to have DIY skills. Homeowners who can’t make their own repairs will have to hire a contractor to help them fix their new house. An interesting side note, if you are interested in how this all works from the auctioneer’s point of view, check out how to build a real estate auction here. It is very interesting to see how this all comes together. 

What Happens at a Real Estate Auction?

Most real estate auctions are held in places like court houses. All real estate auctions are public events that anyone can attend. Banks typically want real estate auctions to be as large as possible to ensure that they’ll get the best price for the house they’re selling. Some auctions are held in conference rooms or ball rooms at hotels. At these larger events, many homes are sold at once.

How Can You Get the Best Deal Buying a Home at an Auction?

The best way to get a good deal buying a home at auction is to do research before making the purchase. A homeowner who finds out the background on the home, visits the property, has the property properly inspected by a home inspector and who has priced the repairs they want to make is in a good position to make a purchase.

Home buyers who want to buy a home at auction should also create a budget before setting out to make their purchase. Home buyers who know how much they can afford to spend, both on the home and on repairs, are more likely to end up with a home that they’ll be happy with for a long time.

Can You Finance a Home Bought at Auction?

Yes, home buyers who would like to finance a home can still buy a home at auction. To do this, they must first be pre-approved (not pre-qualified) to purchase a home for the amount they plan to spend on the home (and then some). It’s best for the home buyer to be pre-approved for quite a bit more than the actual cost of the house to help ensure they will be approved for the mortgage if they produce the winning bid.

Home buyers who bid on a home, win the home and then are unable to secure financing after the bid is won are likely to lose their entire security deposit. For this reason, it’s very important for home buyers to be sure that they’re going to be approved for the mortgage on the home they try to purchase.

Buying a Home? Contact a Real Estate Professional

If you’re a home buyer who would like to purchase a home, either at auction or through a more traditional means, contact a real estate professional. Your real estate agent can help you through the real estate purchase process by providing advice and guidance. If you need financing to purchase a home at auction, talk to a reputable lender in your area. Your lender can answer your questions and help you through the process of choosing a mortgage.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

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