You see the ads everywhere: Rock bottom prices for auctioned property you can sell for huge profits or rent out for a steady income. You can’t lose. Or can you? Certainly, auctions let you acquire valuable commercial and residential properties at a low price. But auctions can be complicated, emotional and risky for neophytes.
Here are five tips to help you make a successful bid and beat out the pros when the gavel strikes:
Get the calendar. Call your county sheriff’s office and ask for all auction dates. Your county courthouse also posts a schedule of foreclosures and upcoming auctions.
Know the properties and the market. Spend a lot of time personally examining any property that you find interesting. Take thorough notes. You won’t have a chance for a formal inspection. Stick with buildings in areas you know well so you have a good idea of the properties’ market value. If the properties aren’t nearby, get an assessment from some realtors who know the market.
Get the sale terms. Find out from the lender’s lawyer if the auction will be cash only. Cash is the usual bidding currency, but occasionally lenders make other arrangements. Most auctions require a photo ID, and if you pay by check you may need a letter of guarantee from your bank. Find out if the auction will be conducted with verbal bidding or sealed bids.
Don’t get caught up in the frenzy. It’s easy to spend more than you planned. Once you pick a property or two, be clear on exactly what you’re willing to bid — and don’t offer a dollar more. In a verbal bidding situation, the action is fast and emotional. Stay calm and within your limits.
Be certain. If you have any doubts, don’t bid. To be successful, be confident you can buy the property for your price and you can make money on it either by reselling or renting it out. Most auctions sell property “as is” with no guarantee of the condition. And the property may come with zoning requirements. So no matter how good the deal seems, be sure you can make money before you bid a penny.
And finally, before you head off to the auction house, check with your financial advisor, lawyer and real estate agent. Your financial security may depend on it. If you know the terms of the sale, research the properties thoroughly and set realistic bidding expectations, you may be able to walk away a winner when the auctioneer slams the gavel down and yells, “Sold!”
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