It can be hard to pass up the opportunity to purchase a home in California for a decent price. However, there are some things that you should know before purchasing a house at auction.
How do you buy a house at auction?
Sometimes houses go up for auction after they’ve been foreclosed upon or when the previous owner defaults on their property taxes. When this happens, there’s no way to sell the house otherwise, so the bank puts the house up for auction. These auctions normally take place at courthouses or even hotel conference rooms where a lot of people can gather. Sometimes auctions can take place online.
How do you find out about these auctions?
Most auctions are posted on direct multiple listing service or MLS reports as well as online websites like Zillow and Realtor.com. However, the MLS reports are more valuable because they include full pictures and nonpublic broker comments.
If there are any property defects or financing options available for a property, those might be included in the MLS nonpublic broker comments. However, these listings are only available to people who have real estate credentials.
What are the downsides to buying a house at auction?
At auction, you get a limited knowledge of the property you’re trying to buy. Auction properties are sold as is, and there’s no home inspections before you buy. There are not a lot of ways to get the bank to cover the cost of repairs.
Most of the time, investors are the ones looking at properties and bidding on them, so the competition can be fierce. If you’re looking to finance the home, you will need to get prequalified. You will also need to make a refundable deposit in order to participate in the auction. This could be anywhere from 5 to 10% of the property’s expected selling price.
There are also auction fees and other things that may crop up, such as claims, liens against the property and potential occupants. Unexpected issues may be confusing, which is why it’s important to work with a real estate lawyer if you’re considering purchasing a property that’s going to auction.