If there's one good thing about the state of real estate, it has given rise to a whole new way to sell and buy: home auctions and foreclosure auctions. With an increasing number of homes available as a result of the slow-down in the housing market, home auctions and foreclosure auctions are becoming more common. According to the National Auctioneers Association, it is estimated that home auctions have grown 5% over the past year and almost 47% since 2003.
When most people think of auctions, they think of a home that has been foreclosed and can be purchased at a bargain basement price. However, there are a number of scenarios that result in a home auction or foreclosure auction and the amount of savings can vary.
The first group is home builders who are looking to quickly reduce their inventory of unsold homes. Often these homes are brand new and have never been lived in, but the home builder is having difficulty selling them. Rather than letting these homes languish on the market, the builder organizes a home auction that can last for one day to several days with the goal of selling all of the homes, often at deeply discounted prices.
Individual home owners who may not be in foreclosure but cannot afford to wait out the slow-down in the market are also turning to home auctions as a way to quickly sell their homes. The main benefit of these home auctions is speed the auctions are designed to sell your home fast. Keep in mind that home owners cannot serve as their own auctioneer due to conflict of interest. The home owner must use a traditional auction house or an online auction service or to run the auction. Home owners may have to sacrifice price in order to sell their house via a home auction. In certain markets, owners are lucky if they break-even and many often must sell for less than the price they paid for the home originally. However, for home owners who do not have the luxury of time, a home auction may be the answer.
The most familiar type of auction is a foreclosure auction where a home has gone into foreclosure and the mortgage holder (i.e. the bank) puts the home up for sale. Many buyers of homes at foreclosure auctions are real estate professionals so an amateur buyer would be well served by doing plenty of research beforehand. According to the Wall Street Journal, be sure to visit the property (even if you can only survey the outside), scope out the neighborhood, and find out if there are any outstanding liens or multiple mortgages prior to attending the foreclosure auction. On the day of the foreclosure auction, come prepared to pay at minimum a down payment and possibly the entire purchase price on the spot. Some banks will allow you to pay off the balance within 30 days. The houses are sold as is and inspections are often not a possibility. Finally, in areas where the real estate market was overvalued and home owners took out sizable mortgages, foreclosure auctions may not represent a huge savings. Banks want to recoup the money they are owed and as a result, the discount is small.
Finally, whether youre interested in a home auction or foreclosure auction, it can be helpful to understand the differences in the multiple bidding processes. According to the National Association of Realtors, there are three types of auctions:
-- Absolute auction The property is sold to the highest bidder, regardless of the price.
-- Minimum bid auction The auctioneer will accept bids at or above a published minimum price. The minimum price is always published in the brochure or advertisements and is announced at the home auction or foreclosure auction.
-- Reserve auction This is also known as an auction subject to confirmation. The highest bid is considered an offer not a sale. A minimum bid is not published and the seller reserves the right to accept or reject the highest bid within a specified period of time usually anywhere from immediately following auction to within 72 hours of the conclusion of the auction. Sellers predetermine the price at which the home will be sold at the home auction or foreclosure auction and are under no obligation to confirm a sale other than at the price that is acceptable to them.
Whether youre a home owner looking to sell or someone looking to buy, home auctions and foreclosure auctions represent another option in the real estate market.