Thousands of home-buying rookies search for their fantasy dream house. Some of them find it, some of them don’t. Some walk away with costs up the yin-yang. That said, being an auction can be a nerve-rattling experience. Especially when you’re unsure of when to make a bid. In the end, buying a home comes down to how much money you’re willing to fork over. Here are 5 tips for helping you buy a home at an auction.
- Follow Rules
Auction companies list rules that all bidders must follow. Not following these rules is punishable by not being able to bid on properties. This is so even if you’re bidding on the phone or online. You could also be sued for breach of contract, which is a wise thing to avoid.
You can never research enough about your future home. Try and find out why the seller is selling, and how many parties are interested in the property. This will allow you to think about the competition and to get a clear idea about the local market and how deep their pockets are. Without knowing what other homes usually sell for in these instances, you will end up paying through the nose. If typical home value is $200,000, you may wind up with a $300,000 purchase. It is also advisable to get a financial pre-approval so you will be authorised to write a deposit cheque, in the event that you win the auction.
- Inspect the Property
About a month before the auction, most auction services like HUD homes post as much relevant information as possible about the property. Use this information and review it extensively. One tidbit they list is the location of the home – visit it with a home inspector. While you won’t be able to step inside, you will be able to see the quality of the landscape, the foundation, etc. You will be able to see whether the property is in financeable condition or not.
- Upper Limit
On the night before the auction, determine what the limit is that you’re willing to spend. This will prevent you from making a costly, impulsive mistake during the auction. A figure like $550,000 will keep you centered, and stop you from making a rash decision about increments. Decide this number for yourself based on the information you’ve gathered about the property.
- Day Of
Arriving about an hour before the auction is set to begin – will give you time to survey the other bidders. Watch out to see who is inspecting the contract. This key insight is something mere onlookers do not do. Remember to be cautious when speaking to real estate agents. Their job is to “suck” information out from bidders, including how much they’re willing to put down. When it comes time to put your bid down, start by bidding high. Be assertive with your bids and do not procrastinate about your next bid. When you’re calling out your offer, avoid low figure numbers. Go for five or six digits instead of three or four.
No matter how the auction plays out, always remember to stick to your “walk away” price. This is more important than sticking to your monthly budget – you cannot forgo this price. There will be other houses for you, I promise. This will keep you from over-committing to a property that eats a hole in your wallet… before you’ve even stepped foot inside it!