We are seeing auctions again in real estate, but they are mostly online, so it’s more like eBay.
Usually the opening bid is quite low compared to the market value. This is what usually attracts buyers to auctions as they think they may be able to get a “deal.” What most people don’t know is that there is often an undisclosed reserve price. So let’s say a home worth $500,000 has an opening bid of $300,000, and the highest bid is $400,000 when the auction ends. But it’s possible the owner of the property had put a reserve price of $475,000, which means the auction is just cancelled in this case. Auctions with NO reserve are preferred by buyers, but feared by sellers.
You can usually view the properties before bidding and it’s common to have normal loan and inspection contingencies. This means you normally don’t HAVE to pay 100% cash. You generally can be represented by an agent if you choose. Either you or your agent can register and bid for you. You will usually need to register and give your credit card information. This is so if you are the winning bidder, they can collect the deposit. This is also an attempt to make sure you are a real bidder. Although, we have heard several reports where the home’s owner logged in and created a fake account to try to bid the price up.
There will be a deadline for offers, but if an offer comes in within the last few minutes, they will usually automatically extend the deadline another 5-10 minutes.
Another oddity of auctions is something called a “Buyer’s Premium.” This is a fee that is paid by the buyer at close of escrow. I’ve seen them as low as 1% and as high as 10%. So it’s important to read EVERYTHING prior to bidding!
If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). #1 for Brentwood listings sold multiple years. To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty.