10 Reasons Why You Should Buy a House at Auction

When prospective homeowners typically imagine what purchasing a property will entail, they imagine a lengthy, back-and-forth process with lots of negotiation and a lengthy settlement process. And while that may be the typical way most individuals purchase a house, it’s far from the only one! Learning to buy a house at auction may sound challenging, but it’s a lot easier than you may think. What’s more, both traditional and online property auctions offer buyers a number of benefits. “What benefits?” you may ask. From speedier transactions to ease of purchasing to less bureaucracy, home auctions provide all sorts of benefits.  

Read on to learn more about why auctions may be the perfect way to select your next home! 

It’s Much Faster

Depending on who you speak with, traditional real estate transactions can have a dozen different steps, such as conducting multiple inspections, retaining legal counsel, renegotiating purchase terms if property deficiencies come to light, and removing any contractual contingencies. And those are just steps related to the closing process itself. Finding a property, determining its fair market value, negotiating with the seller’s agent, and signing a contract can take months or more depending on the local market. 

Auctions work differently. Most proceed very quickly from announcement to actual auction. Once the auction has concluded, most transactions settle in fewer than 30 days. Such speediness can mean that auction purchases are riskier. However, cheap house auctions also lead to our next point. 

You Can Often Find a Good Bargain

Let’s admit something right off the bat: Not every property purchased at auction will be a deal. When buying a house at auction, first time buyers should exercise caution. You’ll have far less opportunity to learn the quirks of a particular house, and auctioned homes are virtually always sold “as is.” 

Still, bargains exist in the auction space, and you could very well buy a house for a fraction of what it would typically cost. Many auctions involve foreclosed properties or real estate seized by a city or municipality for failure to pay taxes. You’ll also find abandoned homes for auction. Additionally, so-called standard auctions may offer value. While a seller typically offers a house at auction with the hope of realizing a higher-than-market price, overly rosy expectations often end up benefiting buyers. 

Variety

People sell real estate at auctions for all sorts of reasons, including the desire for a fast sale, the need for quick cash, and frustration with traditional transactions. This also means that people sell all types of property at auction. Condominiums. Duplexes, triplexes, and fourplexes. Commercial properties. Agricultural space. Raw land. Auctions offer unparalleled purchasing variety. 

You're Competing on an Even Playing Field

If you’ve ever gone to submit an offer for your dream home only to find out that someone snuck a winning proposal in mere minutes prior, you know how frustrating it can feel to not be equally competing with other potential buyers. Auctions eliminate that frustration. People learn about the property at roughly the same time and bid on it at the same time. They all have to put down the same deposit amount (usually 10 to 20 percent) within 24 hours of securing the winning bid. And they all have to come up with the remainder of the monies owed within the same period of time (typically 28 days). While some may try to learn how to buy a house at auction without cash (which is only really possible if you tap a hard money lender or a peer-to-peer network) or how to buy a house at auction with a mortgage (which is much more feasible), every winning bidder will have to pay a specified amount within a tightly defined period. 

You Can Even Bid from Home

The popular conception of an auction either involves people sitting sedately in a large room and raising placards to declare their bids or an animated auctioneer spitting encouragement at a frenetic pace. Yes, most auctions take place in person at a specified physical location. However, greater numbers of auction houses are bringing their auctions online. Many bidders are discovering that they can lounge at home while buying the house of their dreams. 

Transparency

In one sense, buying a house via auction involves having to navigate a purchase with less information than one might have during a more traditional transaction. After all, not every auction allows you the opportunity to thoroughly inspect a property. But auctions excel at a more particular kind of transparency: pricing. Offerers know exactly when others are bidding and how much they are bidding and how high the bidding has become. Such knowledge can help savvy bidders make smarter fiscal decisions. 

No Negotiating

A lack of negotiating in an auction setting goes hand in hand with the transparency of the process. In the same manner that bidders know exactly what others are offering, so sellers know precisely what they’re going to get. There’s no back-and-forth haggling, no manipulative tactics to push the pricing in one direction or another. What happens is what happens, and everyone is aware of it. In fact, the lack of negotiation is one of the reasons why reserves were invented. Should the bidding sag, sellers can rest easy in knowing that they’re guaranteed a minimum amount — and that’s without the haggling that most seem to despise. 

Real Estate Agents Working for You

While this shouldn’t prove true when working with real professionals, buyers can sometimes feel as though they’re in an adversarial relationship with real estate agents. Realtors and brokers play an integral role in auction transactions, but the nature of auctions places them in more of a supporting role, offering expertise and helping to facilitate smooth transactions. This allows bidders the flexibility to seek out their input while also interpreting on their own the freely available data that an auction provides. 

Less Paperwork

Similarly, auctions help minimize the amount of paperwork needed to complete a real estate transaction. Forget about managing reams of documents and having a mobile notary on speed dial. To get into an auction, you’ll typically only need official identification, proof of legal representation, and proof of funds. Should you win, though, you will need to manage more paperwork as part of the closing process. 

You Can Establish Market Value 

When you buy a home the traditional way, you have to sort through comparable sales in order to help determine the worth of a particular property. Auctions have a way of cutting straight through any market-related confusion to the heart of the matter. By keeping their eyes open and their emotions in check, bidders can quickly get a handle on what a property is worth, watching as would-be competitors jump in or bow out. It’s a great way to get a handle on valuations but note that it can become dangerous for those who tend to get caught up in the heady excitement of an auction. 

We understand auctions here at Millennium Properties very well. In addition to helping sellers arrange an auction that helps them dispose of their property in a way that meets their fiscal goals and timetable, we offer prospective buyers opportunities to easily secure their ideal property. We specialize in various kinds of auctions, including troubled assets, trophy properties, developer close-outs, and various property types. Contact us today!