Q. Should I buy my next home at a real estate auction?
A. Auctions certainly have their place in our current marketplace. They move inventory quickly. However people are lured to the auction site by seeing the “previously valued to” price which is what the property may have sold for in good condition at the top of the market years ago. They then compare that to the “opening bid” price which is usually half of today’s market value. The contrast makes many believe they can get a killer sales price. I recently attended an auction and found that almost all the homes sold for fair market value or more (and in some cases much more). There were only a handful of what I considered to be good buys. Further you have to show up with a $5,000 cashier’s check to bid and be ok with their adding a 5% auctioneer’s fee to your price. (That’s $15,000 on a $300,000 house! By comparison in a regular real estate transaction, the SELLER usually pays the broker's fee). Also the auction house and their lenders may expect you to put at least 5% down including the deposit. So auctions are for those who have cash. For those who are cash challenged, we think it’s best to buy a property using a real estate broker using conventional methods. Since there aren’t such great savings at the auction, you might as well get the personal attention of a real estate broker who can help you negotiate a great home buy along with financing that’s even easier to live with than auction financing. However if you must attend an auction, bring us along as your broker. We can give you the objectivity you need not to overbid. Also, choose at least 5 properties on which you wish to bid and stay until the last. Sometimes there are sales that fall through. With fewer bidders at the end you may get a much better buy.