A Home Auction Is a House Buying Option People Forget

If you're looking for a new home, there are usually just four reasons for doing so. First, you want a new place to live. Second, you want a vacation home. Third, you're looking for an investment property you can rent out for income. Fourth and finally, you're looking for something to fix up and flip.

In all four cases, you want to get the most for your money you possibly can, given how buying houses are such huge financial transactions. You can start looking online in areas you're interested in and then follow the traditional path of visiting open house afternoons or getting an in-person tour and showing. Then again, isn't everyone doing that? House auctions are sometimes a forgotten way of buying a home. Exploring home auctions can possibly yield you tremendous savings on some diamonds in the rough.

When Do Homes Go for Auction

If homeowners fall too many months behind on their mortgage payments, then the bank or lender might put the home into foreclosure. If the previous owners can't make amends or find a way out, they default and are forced from their home, which is then put on the market via an auction.

Likewise, homeowners that fall too far behind on their property taxes might be forced out by the government in certain jurisdictions. These are sold in tax lien auctions. Homes can wind up in confirmation auctions or absolute auctions. In a confirmation auction, the lender has the right to decline the highest bid if it's not to their satisfaction. In an absolute auction, the highest bid wins the home regardless of how high or low the bid is relative to market value or seller perception.

Potential Home Auction Savings

The first thing you save with a home auction is time. The seller is not only motivated to sell, they might be committed in the case of absolute auctions. You also get to buy the property a lot faster as compared to a more conventional process. The buying and closing dates are both known factors.

The other thing you save through this process is money. Most home shoppers are looking for their next home through traditional listings, going through them one showing at a time. There simply aren't as many people buying through auctions, so there's less competition. Given how these are homes often being sold off to get lenders out of bad mortgages, they're just cutting their losses. You can find something that's available below its market value or right around a fair value. Given that homes owned by people who fall behind on mortgages and taxes are often not as maintained as they should be, their values are sometimes even a bit depressed. Homes for sale with recent upgrades cost more.

The Home Auction Process

Auctions can take place in-person or online. In either case, you should be given information packets about the homes for sale in advance of the auction date. If possible, visit the homes you are interested in personally so you can get a great look. Have them inspected professionally, although this isn't always possible.

Have enough cash or a pre-approved payment setup on hand to buy a home you win, because if you can't pay for it immediately, it will be simply awarded to the next-highest bidder who can pay.

Also, remember that you're not alone in these auctions. You will be bid against and possibly even outbid. Know what your limit is on any particular home and stick to it. Don't get caught up in a bidding war that takes you past the point of profit or it being worth it in a financial sense.