While most people may understand the process of putting an offer on residential real estate and the process that follows, far fewer are familiar with the ins and outs of land auctions. Here's what you need to know.
What is the process of buying a piece of land at auction?
When buying land at an auction, there are a few things you should keep in mind. First, make sure you have a clear understanding of the bidding process and the terms of the auction. It is also important to have your finances in order before attending an auction.
How much money should you bring to an auction?
Bring a checkbook or have access to cash so you can immediately pay for your purchase if you are the winning bidder. While every auctioneer has different rules, in a typical land auction you are expected to pay a down payment before leaving and pay in full shortly thereafter. The rules for each auction are generally posted online.
What should you not do at an auction?
While it is not true that the simple act of scratching your nose will result in the auctioneer yelling, "Sold!" and pointing to you, you shouldn't wave your bidding paddle around unless you plan on bidding either.
What are the risks of buying a property at auction?
When buying property at land auctions, everything is sold "as is." In other words, you need to have done your due diligence and investigated the property prior to attending the auction.
Are auction properties cheaper?
This is a common misconception. Land auctions do not necessarily result in properties selling for less money. Quite the contrary, auctions can often drive up the cost of the property. You should not go in looking for a deal, but rather attend an auction with a top price in mind that you are willing to pay for the property.
Who pays the commission at an auction?
There is not a traditional real estate commission at an auction but rather there is a buyer's and seller's premium. This is a fee paid by both the winning buyer as well as the original owner to the auction company. The premium is typically a percentage of the sales price of the land.
What happens if you are the winning bidder and you cannot pay?
If you are the winning bidder at an auction and you are unable to pay, you will be in breach of your contract and the land will be reauctioned. If the second-highest bidder meets the reserve price, they will be the new winner.
Contact a local real estate agent for more information on land auctions.