Disadvantages of Purchasing Through Real Estate Auctions
When you are looking for a house to buy, you could consider a few real estate auctions. More people now are using this method to purchase a house. However, refrain from them until you become familiar with the business. Below are several disadvantages that you should note before your proceed to bid on an auction.
1. A high binder rate is required on an auction. Auctions require higher and non-refundable binder that usually amounts to ten percent. This could be a bit risky especially when you are a first-timer in real estate investment. Because it is non-refundable, there is no room for error. In the event that you overestimated your capability to buy, you could lose the ten percent deposit, which is a considerable loss of money.
2. Auctions are usually done on a shorter time. You will not get the chance to study the property and its market thoroughly. You usually receive the list of properties a week or two weeks before the actual auction day. You can easily make mistakes in your choice.
3. Take note of additional liens. There are cases where the second mortgage holder will foreclose without liens like the first one that went into default. Normally, the auction starts with the balance of the second mortgage. If you purchase the property, you may be automatically responsible to shoulder the monetary responsibility of the first mortgage. You might find yourself stuck with unexpected debt, which could ruin your investment, unless you find time to do a quick search on the real estate investment.
4. Atmospheres at auctions can be a bit intoxicating. It is normally loud and moves at a fast pace. Real estate bidders, gawkers and auctioneers making a circus like setting, turning a bidder into a homebuyer in a few minutes, might surround you.
5. The homes sold at auctions are sold "as-is", meaning that if there are problems in the property, there is no recourse or alternative for you. Since you have not had time to make a thorough inspection of the property, there is a possibility that you might overbid it. Alternatively, you might fail to see problems beneath the surface.
6. Be wary of properties sold at auction that are located far from your place. You might not have an idea on any troubles or issues in that area or the prevalent market rates there. Make sure to have knowledge in water supply, sewage disposal and electricity concerns of the location of the property. Consult a title company that will be able to provide you with valuable information regarding land acquisition.
Try to conduct an extensive inspection of the home and the area it belongs in before you bid and buy it. Get yourself acquainted with the process in property auctions. Being prepared could ease a lot of stress and uncertainty that typically comes in having to bid for a home than in the more typical manner of buying. Being observant and wise can give you a full advantage on property auction sales.
1. A high binder rate is required on an auction. Auctions require higher and non-refundable binder that usually amounts to ten percent. This could be a bit risky especially when you are a first-timer in real estate investment. Because it is non-refundable, there is no room for error. In the event that you overestimated your capability to buy, you could lose the ten percent deposit, which is a considerable loss of money.
2. Auctions are usually done on a shorter time. You will not get the chance to study the property and its market thoroughly. You usually receive the list of properties a week or two weeks before the actual auction day. You can easily make mistakes in your choice.
3. Take note of additional liens. There are cases where the second mortgage holder will foreclose without liens like the first one that went into default. Normally, the auction starts with the balance of the second mortgage. If you purchase the property, you may be automatically responsible to shoulder the monetary responsibility of the first mortgage. You might find yourself stuck with unexpected debt, which could ruin your investment, unless you find time to do a quick search on the real estate investment.
4. Atmospheres at auctions can be a bit intoxicating. It is normally loud and moves at a fast pace. Real estate bidders, gawkers and auctioneers making a circus like setting, turning a bidder into a homebuyer in a few minutes, might surround you.
5. The homes sold at auctions are sold "as-is", meaning that if there are problems in the property, there is no recourse or alternative for you. Since you have not had time to make a thorough inspection of the property, there is a possibility that you might overbid it. Alternatively, you might fail to see problems beneath the surface.
6. Be wary of properties sold at auction that are located far from your place. You might not have an idea on any troubles or issues in that area or the prevalent market rates there. Make sure to have knowledge in water supply, sewage disposal and electricity concerns of the location of the property. Consult a title company that will be able to provide you with valuable information regarding land acquisition.
Try to conduct an extensive inspection of the home and the area it belongs in before you bid and buy it. Get yourself acquainted with the process in property auctions. Being prepared could ease a lot of stress and uncertainty that typically comes in having to bid for a home than in the more typical manner of buying. Being observant and wise can give you a full advantage on property auction sales.
