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5 Tips For Success At Your Next Property Auction

Real estate auctions are a great way to acquire property. Whether you are looking at tax lien or foreclosure auctions there are a few things you can do to give yourself the best possible chance for success.  As high as the potential upside is at auctions you can also lose money if you are not careful.  There is a definite risk and reward associated with every property.  All it takes is one successful auction to change your portfolio and give your business a boost.  On the flip side one bad property could put you in a hole that is difficult to get out of.  Whether you are a seasoned auction investor or are considering attending your first one there are a few steps you need to take.  Here are five tips for success at your next property auction.

• Do Your Homework. You probably wouldn’t just show up at a car lot and make an offer on the first car you see. Most potential car buyers spend hours researching everything about the make, model and price of the car they are buying. The same is the case with a property auction. A typical auction gives you at least a few weeks to do your homework. Even if you are not allowed inside of the property there is still plenty of information you can obtain. Ask your real estate agent for the listing history and read the comments line by line. This may provide some clue if any work was done or if changes were made to the interior. You should also work with an attorney who could pull preliminary title and make you aware of any liens. Once you take ownership you are responsible for everything on the title. Removing an old lien could be pricey and time consuming.

• Market Trends. Price is not always the most important factor when buying an investment property. Everyone wants the lowest price but location is equally as important. If there is a property that is outside of your typical investing area you need to know everything about the market. Getting a property at a discount doesn’t do you any good if the area is riddled with short sales and foreclosures. If this is the case you will have a tough time finding an end buyer regardless of the work you put in. You can find a lot of the information by doing a quick search on the town website. Look at new housing permits, unemployment numbers, average days on the market and foreclosure trends. As tempting as it may be you need to walk away from a property unless you are totally confident in the market. If the trends are poor you should go to the auction without making a bid and simply see how things work.

• Set Firm Limits. An auction is one of the most exciting things you will do as a real estate investor. You may have thought about the auction for weeks and already made plans for what you will do with the property after you take ownership. When the auction starts and you see the price quickly escalating you need to know when to walk away. Of course this is easier said than done but it is an absolute requirement of auction success. In the days prior to the auction you should look at comparable sales and current listings to give you some idea of the market. You should take into consideration that you don’t know what lurks on the interior that can be costly. Whatever formula you come up with or numbers you look at you need to have a firm walkaway number in place before the auction starts. The minute you go over this number it is difficult to stop. A few thousand may not seem like much but before you know it you could be $10,000 higher than you wanted. This starts the process in a hole that may be difficult to overcome.

• Understand The Process. There are a few basic steps and terms that are universal with every auction. In most cases you need to register in order to move forward. This requires you to call the attorney who is handling the auction and supply them with a proof of funds. It is important to make sure that your proof of funds letter is updated and has sufficient funds to cover the properties you want to bid on. You don’t necessarily need to pay cash for the properties but you may only have 30 days to close or you run the risk of losing your deposit. You should also know what you need if your offer is accepted. Typically a cashier’s check within 24 hours is sufficient but it is a good idea to know before you start.

• Get Something Out Of Every Auction. Every auction will not produce a home run property. In fact you may go several auctions without walking away with a deal. That being said there is still something you can gain from every auction. An auction can be a great way to meet fellow investors in your area. Even though there is a sense of competition involved talking to the right person can open doors for your business you did not expect. You can also meet the attorney who is running the auction as well as reach out to the tax collector in the town. A property is the main prize of the auction but there are other benefits that can be just as important.

Go to every auction with an open mind and as much information as possible. Most important know when to walk away and try not to get caught up with everything that is going on

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