Bidding for a Home at On-Line Auction: Part 2

said on February 20th, 2013 filed under: Market Trends, Negotiating, Real Estate Nuts and Bolts

Here are some aspects, and some risks, of the auction for you to consider.

You cannot place the bid yourself. We have to do it for you. That’s because we have the required “ticket” to the auction–a real estate license. Our license promises the auction house that we have vetted you properly, and that you are financially qualified to make the purchase if you are the successful bidder.

There are extra costs involved in winning a bid.   Sometimes the costs are modest, a few hundred dollars, called a “technology fee” or something like that. These fees are tacked on to the price.  Sometimes the fee is not modest at all, a one percent surcharge. If the property is $250,000 then the surcharge is $2,500. I have seen the surcharge as high as five percent!  You read that right. So whatever is the final bid, add five percent. On a $250,000 purchase it would be $12,500. Yikes.

As in any California real estate transaction, you will make an earnest money deposit (EMD) when you open escrow. The difference here is that the amount is set by the auction house, $5,000 is typical, and it is non-refundable. No matter what. It will apply to the purchase price as long as you complete the purchase. But if the purchase fails, kiss your earnest money goodbye.

The auction house will dictate the escrow company, title insurance company, the “closing” company, the time frames, and even the type of contract used. It will all be stacked in their favor. You, and your agents, will have very little to say about this, and very little recourse if things go wrong.

Auction properties are sold strictly “as-is,” and the sellers are not fooling around. There is no, repeat no investigation period once your bid is accepted, to be more exact, once they have your non-refundable earnest money deposit. You should do all of your investigations before you give them your money. Sure, you can keep investigating once you are in escrow, but if you find something horrible, something that makes you want to cancel, well that’s tough, because they are not going to give you back your money. Not. going. to. give. you. back. your. money.

All of that sounds pretty scary, but there are upsides.

The bidding process is exciting and fun.

Sometimes you can score a great deal for yourself.

It will often go much smoother than I have described. Last year we bid and won a lovely home for a young couple, first-time buyers. They were able to purchase a home below market value, a home they could not have afforded otherwise. The closing agents we worked with were competent and pleasant. Our “kids” are very comfortable, and very happy, in their new home, the wonderful home they won at auction.

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To find out more about real estate in the Golden Hills of the Sierras, just call Bob at (530-906-1023) or CJ at (530-9064715) or email us at [email protected] or [email protected]

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