All about real estate auctions

Individuals looking forward to selling property have a variety of mechanisms to let the prospective buyers know of their intent to sell. A real estate auction is one such option, and, like all the other options, it has its own advantages and disadvantages.

A real estate auction is very much similar to any other auction wherein prospective buyers bid for the property, and the person whose bid is the highest has the right, as well as obligation, to buy the property.

Of late, on-line real estate auctions have been gaining popularity with real estate industry participants since they are extremely simple for the participants and easy to conduct.  Like most auctions, the seller fixes a reserve price, which indicates the minimum price that he or she is willing to accept for the property.

A seller may decide to use the auction route since the amount of time required to close a deal with the auction mechanism is significantly lower than other sales avenues. It is fairly usual to find all foreclosed properties being sold through the auction route. It is because of this that auction properties are usually available at a discount from the market price. This discount could vary anywhere between 5-15 percent, depending upon property details. There are other extraordinary circumstances where property auctions are handled by the court because of disputes between property owners or married couples.

The response to real estate auctions is usually very enthusiastic since these properties are available at a cheaper price compared to comparable properties in the same neighborhood. A person who is bidding for a property in a real estate auction has to be well read and informed, not only about the property market in general, but also about the typical nuances of a property sold through the auction process.

The biggest difficulty bidders face is that they have to bid for the property without doing a detailed assessment of the property available for sale. The amount of time various bidders have to inspect the property is very short, and it is difficult to know shortcomings at first glance.

The other big drawback associated with buying an auction property is that the buyer is not provided any flexibility in terms of selecting the lender. These properties have a financier attached, and the buyer has to depend on the lending institute tied to the property. There is not much time available for the highest bidder to organize financing; hence he has to settle on the terms and conditions of the existing lender for the auctioned property.

A bidder in the real estate auction market has to be extremely well-informed about the technical aspects of each auction in terms of the time available for inspection, time available for payment, title documents, etc. You should be a participant in the auction process only if you have the requisite skills and detailed information about the property being offered.
 
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