If you’ve ever wondered how to buy a house at an auction, here are some key things to understand and expect. An auction is a unique way to buy a house, but while it may be different, that does not mean that it is bad.
There are a million different ways to invest in real estate, so why not learn how to buy a house at an auction, too?
What to Expect When You Buy a House at an Auction
As people learn that I invest in real estate and buy houses, eventually someone asks me about auctions and what I think of them. If you know my story, you know that I originally started investing in houses through auctions. Now, I made a few mistakes and did not have a clue what I was doing, but I was all in.
Thankfully, you do not have to make the mistakes I made. You have me! And I want to help give you the important information that I did not quite understand so that when you do go to your first auction, and you should, you will at least have an idea what is happening.
Not too long ago some ladies from my church approached me. One lady specifically had a deal she had found that was an auction and she was interested to buy. The lots were each a few acres and not far from the lady’s house. When she read the newspaper article to me, I figured it was going to be a bankruptcy auction and sure enough it was a U.S. Treasury auction.
She learned that she would need to send $1000 in advance in order to bid on the lot. And, that concerned her. She was not sure if that was right or not and whether or not she’d get her money back, so she asked me.
Tip #1: Auctions want money in advance.
It is very common to have to put money down in order to buy a house at an auction. This is especially true when you’re dealing with the government, but even ma and pa auctions want that. And, here’s why: they want you to send in money because they don’t like the last minute craze when people sign up right before things go live. They don’t want to be bombarded with the paperwork and last minute additions.
More importantly, they know and you know that people pay attention to what they pay for.
So, that $1000 upfront payment helps to remind people to bid and follow through. If people did not have any money invested they would likely not show up or bid on the properties. The upfront payment is kind of a guarantee of engagement and activity.
That is why the government or some of the big auction houses require $1000-$10,000 to be held in escrow to make sure that people pay attention to what they paid for.
Tip #2: Go to local ma and pa auction houses.
Another thing to consider is that the bigger the auction company, the longer it will take to get your money back. Ma and pa places don’t usually have this problem. Sometimes those larger companies can take months and months just to get your money back. This is important for you to understand because it means your money will be tied up however long that takes.
I think this is one of the greatest benefits of staying small and local, even when you want to buy a house at an auction.
These ma and pa companies can do things much faster than the large, corporate auctions. They also are able to complete the process more smoothly, which just makes the whole thing more fun for everyone.
Tip #3: Be ready to give your information before your bid.
The property that this lady was interested in was going to be an online auction. So, she needed to create a username and password and put in all of her personal information ahead of time, too. The reason for this was so that if she did win that they would not need to chase her down. The paperwork was already going to be finished and ready, plus they would have your money all set. So, it might feel strange to do all of these things ahead of time, but it is necessary in order to buy a house at an auction.
Now, after learning all of this, my friend asked if I thought it was worth it to go through the process. She knew she might not buy a house at an auction, so she wanted to know my thoughts. But, here’s the deal, ladies: anytime that you can go through the process and learn what it takes to buy a house at an auction, that’s a win.
You’re either going to get the money back or buy the property. There’s no better way to learn than to go to an auction and buy some land.
Plus, it never hurts to have more land.
She and her husband drive past this property all of the time, since it is close to their home. So, naturally, I told her to buy it.
Tip #4: Even if you don’t win, taking action is more important for your goals.
But, I also reminded her to go through this process because if real estate investing is an interest of hers, this could be the first step to build momentum. I remind my FDDF people all of the time that you need to be active and out there doing things. If you are just sitting on the sidelines, the likelihood of finding the next deal is small. But, if you are out playing there is a good chance that you trying will bring more business opportunities.
If you swing and miss, at least you swung at it.
And who knows who is watching you to see if you are going to follow through on your dream. You never know how one deal that falls through will lead you to the next one. God has a way of working in strange ways like that. But, as long as you sit back and watch, you cannot trip over a good deal.
Get out there, start putting some offers and bids in, so that you can start the process and get things rolling. That is what it takes to buy a house at an auction.
It might not be as pretty as other ways to buy houses, but it is a great option and skill to have. So, what are you waiting for? Find a local auction and sign yourself up to go. You got this!