Buying a property at auction can be a great way to get the best price on the right asset, but the inexperienced buyer could possibly find him or herself in deep water if things go wrong. At Xome, we want all potential buyers to feel confident and comfortable in their bidding and buying experience, so we are in the process of putting together a repository of informational pieces to help all potential homeowners with successfully buying a property at auction.
When it comes to buying a property at auction, doing your due diligence isn’t just part of the transaction, it should be a top priority. It’s easy to want to side-step a few of the more tedious or dull parts in order to get a bid accepted, but that can cause major issues that can come back to bite you in the end.
Doing your due diligence gives you the best opportunity to walk away from an auction having made the right choice. If you emerge with a property you do so with confidence that you paid the right amount given your needs and intentions. If you don’t emerge with a property the effort you put in before the auction will help you feel reassured that, while the right property and price didn’t happen today, it will soon.
So before auction day arrives and you enter the event you’re going to want to get these tasks completed:
- Read the Auction Participation Agreement and register for the event. Doing this in advance will ensure you can log in and bid as soon as the event is live. If you have any issues in this part of the process please call Customer Service at 844-400-9336 and they will help sort out the problem.
- Read and evaluate the property details, taking care to understand how the specific property meets your needs.
- Pull a preliminary title report (Xome has these available in the Documents area for most auction properties). Make sure you are willing and able to clear liens that the previous owner or seller did not.
- Obtain and review HOA guidelines to ensure your goals for the property are possible. If you are building a rental portfolio, will they allow rentals? If they allow rentals to a defined capacity, where are they in relation to the rental cap? If you are repairing to flip the property, do they allow the types of construction and modifications you need to make? Are there time restrictions for construction that could impact your desired timeline?
- Review the auction participation agreement and property reports if available on the property details page.
- Know the occupancy status; if the property is occupied understand the eviction process and associated costs for the location of the property.
- Understand the closing and purchase costs. Many auction properties transact with a buyer’s premium, a fee added to the winning bid amount.
- If allowable, get estimates for the repairs and enhancements you wish to make.
- Take all the above factors into consideration before buying a property at auction and, looking at local comps (Xome and ValueYourHome.com can help with valuations and comparable recently sold homes), determine if the ROI from this project will be sufficient for your business needs.
How much research should you do?
The short answer: a lot.
Doing your research before the auction goes live is extremely important. Most of the properties are available to view online two to three weeks before the auction starts (Xome auctions start on Saturdays) so you have plenty of time to collect your information.
You’ll want to narrow down on the properties you’re most interested in, find out if they are occupied (have someone living inside them), whether they are short sales, redemption properties or anything else that’s important about the property. If the property is vacant, you’ll most likely be able to schedule a showing with the listing agent to see it in person.
What are the fees?
Whenever buying a property at auction, always be sure to understand the associated fees before striking an agreement (an auction bid, should you win and your offer be accepted, is an agreement). Many online auction sites, including Xome, will have a credit card hold as part of their event registration process. While not a fee, credit card holds can impact available cash or cash equivalents. Also, the credit card hold does not apply to the purchase price or earnest money as it is released after the Auction Event.
Speaking of earnest money, an earnest money deposit may be required to proceed on a property. Typical earnest money guidelines do apply. Finally, when buying a home through the Xome platform you may have to pay a buyer’s premium; the details of which can be found in the Auction Disclaimers.
Why do some properties get pulled out of auction?
As you move closer to auction day it’s possible that properties can be pulled out of the event. There are a plethora of reasons that can lead to this result. It is common for properties that have been pulled from auction to be put back in at a later date, so check back often should your desired property return.
Ultimately, as a buyer doing your homework you will save a lot of time and a lot of money. If you have any questions on any of the properties, don’t hesitate to reach out to Xome Customer Service. We are here to help.