Home bargains on the auction block |
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But with an auction, successful bidders don't have these options to get out after they've struck the deal.
Many firms require at least 5 percent or 10 percent of the price of the home in cash as soon as the bidder wins a
property. Then the buyer must close on the sale in 30 days or so. If his financing falls through, he loses that initial deposit, notes
Tommy Williams, past president of the National Auctioneers Association.
What's more, the home is typically sold "as is," meaning that you can't expect to get out of the purchase because you
send an inspector who finds a leaky roof or other fault.
Homework comes first
Auction buyers do have a chance to inspect properties before the auction date. Most auction houses advertise the upcoming sale in
local papers, and buyers can inspect homes and pick up packets with information on the home, such as the property's plat of survey, during
certain advertised times.
Moreover, most firms provide real estate agents with a commission if they bring buyers to the auction, and agents help
buyers judge the value of properties.
In today's tight lending environment, auction bidders can't be too careful about ascertaining a home's value, warns
Jorge Gomez, president of the Illinois Association of Mortgage Professionals.
It's possible that a buyer could be approved for a certain amount of mortgage, but then a lending firm doesn't like the
amount he bid for a home. "Appraisals coming in short is the biggest stumbling block we are finding for loans not coming through," says Gomez.
Before they bid on a property, Gomez suggests asking a lender for referrals to a certified home appraiser who can peg
a value on the home. That may cost a few hundred dollars, and the auction buyer will have to pay for another appraisal ordered by the
lender if he actually goes through with a purchase and formally applies for a loan, but the extra expense is worth it if it helps
guarantee that you'll get your loan, Gomez warns.
Sometimes the auction firm teams with a lending company to provide financing on the properties. Using one of the
partnering lenders means that the lender may be more familiar with the value of a particular property. Still, consumers may want to
consult their own lender to ensure that the rate and terms offered are competitive, concludes Gomez.
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