There’s a viable alternative to the common process of buying a house from a real estate agency. There are house auctions that occur where people can buy a house at a fraction of the price compared to if it were on the open market. If it sounds too good to be true to get a great deal on a beautiful house simply by going to an auction, then you’re right.
Buying a house at auction can be risky depending on what you’re ultimately planning on doing with the property. If you’re a real estate investor buying it for the property and plan to use a demolition Perth company to tear it down and rebuild, then there’s low risk. Buying one to live in yourself carries quite a bit more uncertainty.
It pays to understand the process so you can decide for yourself if you want to get involved in an auction. In this post, we’ll go over several things to keep in mind so you can make an informed decision.
How the auction works
Just about all the houses in an auction have been expropriated from the owner in some fashion. Some are taken by the bank due to the owner stopping making mortgage payments. Others may be seized by the city or state where they’re located because property taxes were not being paid.
The auction house will then list the inventory they have on various platforms. Savvy home buyers know where to look. Once it’s listed, there’ll be photographs of the house on the site with the opening price shown. The date of the auction is also listed there, so people can do their due diligence before the sale date.
Bidders aren’t allowed to access the home for viewing at any point. The house is sold “as-is” and the buyer takes on any risk if the house needs serious renovations or even has to be demolished.
Subsequent to this, it works like any other type of auction. People place their bids and the highest wins and is able to purchase the house. Most will pay cash however, there are some circumstances in which a bank would give a mortgage for an auction-bought property.
Doing due diligence
Since the buyer assumes all risks, it’s important to carry out due diligence to make sure the house is clear to be bought. There may be liens on it that will need to be paid by the buyer. A title search should be done prior to the auction to make sure it’s clear and can be bought without any additional payments. Sometimes there’s a second mortgage on a home that doesn’t appear on a title search, so ensure to have title insurance just in case.
Take a look in-person to see the condition of the house. You won’t be allowed to go inside but looking at it from outside may be enough to know if it’s in bad shape. Although, even a house looking good on the outside can have major issues. Be prepared to carry out major renovations.
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