Great deals at auction
Many ask and even more wonder what opportunities they may be missing to buy bargain-priced real estate at auction. The answer is, it depends. It depends on a lot of factors like; do you have cash or a lender who will authorize you to bid up to a pre-approved amount? Some auctions want to receive the entire sale amount the day of your successful bid. Others will wait a couple of days and some will allow a financing contingency period that will give you the appropriate 30-45 days to get your ducks in a row.
One common misconception is that foreclosure auctions are a great place for bargain properties. One must consider who the competition will be. The party with the vested interest is always the creditor so you can be relatively certain they will be represented at the auction. Their investors already have a stake in the property equal to the owed amount even if the market has shifted and the property's current value is below that. Since the lender has a Deed of Trust against the property being auctioned, you will have to bid above the amount owed to stand a chance of getting that property.
If you really are enamored with a particular property that is being auctioned in foreclosure, you might find it cheaper after the lender has taken possession and needs to dispose of it. Remember, lenders lend money, not real estate. Holding physical assets restricts the amount of cash they have available to loan so they want to convert those assets to cash as quickly as possible to generate more loans which in turn leads to more money over the life of its loan.
Tax auctions can be a way to buy real estate for less than market value since the back taxes are all the county is allowed to get in most cases.
Some people, for whatever reasons, simply stop paying their taxes and after a period of time, the county takes possession of the property with delinquent taxes and sells them at public auction to the highest bidder. They expect to be paid that day for the full bid price.
Usually, the property's delinquent taxes are less than its value but you will need to do some research to determine that for sure. Your Realtor can certainly help with that. Sometimes, a property that looks like a steal in the tax records may have defects that make it less than desirable which could be one reason the previous owner stopped paying taxes. If, in fact, it is a valuable property you should still be prepared to have competition from other bargain hunters at the sale. If it is a viable piece of property it is unlikely you are the only one who noticed. Another pitfall of tax auctions is that the delinquent tax payer may bring their taxes current at the 11th hour removing the property from the auction after you have invested time and resources evaluating its value.
Sheriff's sales are another form of government auction where you are likely to find discounted properties. Although you are required to pay for those at auction too, you have to be cautious. More than a few people have purchased real estate at a sheriff's auction and have invested in improvements only to have the original owner redeem their property, up to a year after the sale, leaving the "investor" holding the proverbial bag. The law does allow for reimbursement with reasonable interest but you may not truly own a property purchased in this manner until a year after the sale.
HUD, Fannie Mae and Freddie Mac all sell properties through auction sites controlled by them. Each has a time period where the homes they offer for sale are only available to bidders who will live in them as their primary residence. This, in the interest of promoting home ownership which we all know is good for the economy and for society. After this time period the houses are available for investor bidders but competition is fierce and properties usually sell quickly and for full price. Most often contingencies like financing and inspection may be allowed but most often, no repairs an inspection may discover needed will be paid for by the offering bureau.
If you are truly interested in buying real estate at auction, do your research. The quickest and safest way is likely through the services of a Realtor who is experienced in these types of transaction.
Trust an expert ... call a Realtor. Call your Realtor or visit www.cdarealtors.com to search properties on the Multiple Listing Service or to find a Realtor member who will represent your best interests.
Kim Cooper is a real estate Broker and the spokesman for the Coeur d'Alene Association of Realtors. Kim and the Association invite your feedback and input for this column. You may contact them by writing to the Coeur d'Alene Association of Realtors, 409 W. Neider, Coeur d'Alene, ID 83815 or by calling 208-667-0664