7 Top Tips for Buying Property at Auction

Buying property at a real estate auction can provide an exciting opportunity to purchase a home, land, or investment property, often well above market value. However, being successful at auction requires skill and thorough preparation.

Navigating the fast-paced bidding and wide selection of inventory takes research and strategy. Many make costly mistakes at auction by getting caught up in bidding fever. Use caution and diligence when buying at an auction.

Follow these 7 essential tips to bid smartly, avoid overpaying, and secure an excellent property deal through the auction process.

With careful planning and execution, you can come out of a real estate auction with a dream property at an amazing bargain price if you understand the process completely and enter each bidding war well-prepared.

Perform exhaustive research on the property’s value and condition

Beginning weeks before the auction date, dig deep into intensive research on the property you wish to bid on and its current, accurate market value.

Thoroughly review all listing materials, disclosures, inspection reports, title documents, termination notices, tenant information, and all other available paperwork.

Physically drive through the property’s neighborhood and surrounding suburbs multiple times to get a first-hand visual of location, amenities, external condition, and street appeal.

Check recent sales prices and days on the market for other highly comparable homes nearby to gauge a truly realistic value range for competitive bidding purposes. Ask your local mortgage broker for a CoreLogic Property Data report. This has great information on the property you are looking to purchase. If needed, consider hiring a highly qualified professional appraiser to provide a comprehensive valuation assessment of the property’s overall worth.

The more insights you gain upfront on current conditions, required repairs, neighborhood factors, market trends, and deeply researched valuation, the better equipped you will be to determine a maximum bid price.

Secure pre-approved financing well in advance of bidding

Act quickly after winning an auction bid to finalise the transaction, as full purchase payment is typically due within 30-45 days (or whenever settlement is agreed upon).

Have in-depth conversations with lenders several weeks before auction day to get pre-approved for a competitive mortgage loan, hard money loan, private financing, or bridge financing tailored to an auction purchase.

Having financing already vetted, negotiated, and locked in place demonstrates you can perform swiftly if you win and accelerates the post-auction closing.

Understand all associated fees, interest rates, monthly payments, and repayment terms intricately so you know which financing option is realistically affordable based on the property value and your overall budget.

Generally, only plan to finance 60-80% of the purchase price, not 100% or more.

Set your maximum bid strategically based on meticulous financial calculations

With your pre-approved financing and comprehensive research on the property’s value completed, determine the maximum price you can reasonably pay while still getting a bargain deal.

Build in a 10-15% buffer to your maximum bid to account for unexpected repairs or renovations that may be required.

Auction bidding wars are a commonplace, but disciplined bidders stick firmly to their budget ceilings and don’t get caught up emotionally in overpaying, regardless of competition. Setting a firm capped price in advance keeps you grounded once the heated competitive bidding takes hold.

Complete your due diligence with professional property inspections

Never bid on an auction property completely sight unseen. Make great efforts to schedule and attend all open houses and preview showings to view the interior first-hand.

Bring a trusted and qualified contractor, home inspector, or structural engineer to identify any issues, code violations, or necessary repairs. Get written repair estimates and scope for all problems identified to factor into your bidding calculations.

If you cannot access the property pre-auction, build an extra 15-20% legroom into your maximum bid limit to accommodate the added risk. Relying solely on listing photos is extremely risky and often hides major existing flaws.

Fully understand the auction rules, terms, and bidding pocedures

Auction bidding moves extremely quickly, so meticulously familiarize yourself with the entire process before participating. Register with the auction company immediately to get your assigned bidder number and complete all paperwork early.

Carefully note the minimum opening bid and required bid increment amounts as the specific auction terms dictate. Appoint one person from your side to place bids to ensure clarity.

If you cannot attend in person, get set up for phone or proxy bidding with ample lead time before auction day. Only blindly bid at an auction without fully understanding the mechanics to avoid costly procedural mistakes.

Devise your bidding strategy well in advance

Having a well-defined and thoughtful bidding strategy is absolutely vital for auction success. Decide your optimal opening bid based on the latest assessed or appraised property value before the “auction fever” pulls you in.

When bidding competitively, increase your bids decisively and stick firmly to your predetermined maximum price for discipline. React quickly to counter other bidders, but keep emotions out of spending above your budget. Losing a heated bidding war feels disappointing at the moment, but overpaying to win can hurt you financially over the long term.

Meticulously review the purchase contract and all terms

Consult an attorney to explain any complicated legal terminology. Only proceed with bidding if you agree with the contractual terms to avoid issues later. Please inquire about any concerns on the purchase contract before auction day.

Read the real estate purchase agreement repeatedly and thoroughly before placing a bid. Understand all contingencies, inspection time frames, closing dates, and any provisions about the sale. Know exactly how much deposit is due immediately upon winning the bid.

Conclusion

Buying real estate at auction carries great reward potential and risks if underprepared. With diligent upfront research, intelligent bidding strategy, and a full understanding of the process, you can secure excellent deals on property.

Use these 7 comprehensive tips to bid smartly, avoid overpayment, and navigate the rapid auction environment confidently. Setting yourself up properly for auction success takes focus, discipline, accepting quick pacing, and staying caught up in bidding drama.

While auctions require an educated tactical approach, they present a unique opportunity to purchase homes, land, and investment property, often well below market value if done correctly. Enter each bidding opportunity with meticulous preparation and research to win your dream auction deal.