For those in search of a new home and a bargain, the allure of a home auction can be understood. Often, these homes seem to be going for an incredibly low price. Before you take another step, however, you might want to see what you are getting into with these home auctions. Read on to learn why these may not really be the great deal that they seem to be.
A lot of fine print
Most auctions, with the notable exemption of those held by the county government for tax purposes, are sponsored by large nationwide auction companies, and the homes for auction can be accessed via the internet. Also on the web site are the pages and pages of rules and provisions to abide by. While it may seem tedious, failure to read and understand these rules could end up costing you many thousands of dollars. What you likely will not find on that website is any in-depth information about a given property. What you see is what you get when it comes to auctioned properties. Some issues to look for in the rules and to fully understand include:
Home inspections: For homes that are sold and financed the traditional way, a home inspection is not only part of the process, but the entire sale can hinge on its findings. With an auctioned home, you normally cannot even visit it until after you have "won" it, making a home inspection even more important. Unfortunately, you could end up paying out thousands of dollars in home inspection fees for these properties, since they are often so badly damaged or ill-maintained that a lot work will be needed to make it ready for occupancy.
Opportunity to view: Unless you are looking for a home to redo and flip, you may not be interested in a home for auction. In most cases, these homes are off-limits if you want to do a walk-through. You must be satisfied with window-peeping and the scarce photos offered.
Cash at the ready: With a traditional offer to purchase, you are normally required to come up with at least some cash, known as "earnest money." It is usually a small amount, however, often a few hundred dollars. For auctioned homes, you must have a large cash deposit available to secure your home on the day the auction ends (if you win, of course). This amount is usually thousands of dollars.
Buyer's premium: This extra charge can be unexpected and consists of a percentage of the winning value of the home.
Don't fall victim to the temptation for an easy or cheap home purchase, talk to your real estate agent today.