Buyer beware: Real Estate auctions

From the President

www.ygaor.com

(Updated: Friday, May 02, 2008, 2:44 PM)

The most recent trend I've seen is related to how foreclosures and auctions are being handled in various parts of the country. Some regions are having foreclosure tours and going as far as using a bus to preview homes. Foreclosure is when the lender takes back the property. Some lenders employ real estate brokers to sell the homes, and others are utilizing the services of auction companies.

Buyers are going to auction to purchase a home looking for a "great deal." I've recently been told of a situation that was of concern to me. A buyer purchased property at auction without agent representation, and the buyers chose not to, or did not know to inspect the property in some manner before making an offer that was ultimately accepted, resulting in a closed transaction. As a result, that particular buyer purchased a home that had county permit issues which they are obligated to rectify. Other examples of liens include: unpaid taxes, mechanic's lien, and other liens on title. There are even situations where a cloud on title has been created. Cloud on title: an invalid incumbrance on real property, which, if valid, would affect the rights of the property owner.

Below is information from the National Association of Realtors article Auctions: The Basics & Benefits

What is a Real Estate Auction?

A. A real estate auction is an innovative and effective method of selling real estate. It is an intense, accelerated real estate marketing process that involves the public sale of any property -- most certainly including those that are nondistressed -- through open cry, competitive bidding.

Benefits to the buyer

Smart investments are made as properties are usually purchased at fair market value through competitive bidding

• The buyer knows the seller is committed to sell
• In multi-property auctions the buyer sees many offerings in the same place at the same time
• Buyers determine the purchase price
• Auctions eliminate long negotiation periods
• Auctions reduce time to purchase property
• Purchasing and closing dates are known
• Buyers know they are competing fairly and on the same terms as all other buyers
  

I conducted a little internet research to find out more about auction companies and some of the process. I found the following company's Web site REDC: Real Estate Disposition Corporation www.ushomeauction.com The Web site has an extensive FAQ section. I encourage you to conduct some independent research of companies if this is a subject you are interested in.

Real Estate disposition corporation: FAQ

Q. Because these properties are foreclosed on, are there any liens on the property?

A. No! The sellers provide insurable title to the properties sold at auction. You will receive a standard "Title Policy" as part of your transaction. (According to the Web site property title is transferred usually within 30 days).

Q. What if I change my mind? Can I cancel the transaction after the fact?

A. No! Once the auctioneer has announced "sold," you have agreed to purchase the property. There is no rescission or "cooling off period." That is why it is important for you to conduct all of your due diligence and inspections prior to auction day and bidding on the property.

This auction company obviously wants to provide as much information up front as possible. They encourage inspections, previewing the home, and understanding all you can about the house and property.

If you are interested in buying at auction please be sure to conduct upfront and thorough investigations. Go to the county with the assessor's parcel number and find out if any permits were pulled to do work. Talk to the tax assessor. Preview the property multiple times, have a home inspector, pest inspector and other professionals check out the property also. These are upfront costs that will save you a potentially large headache in the future. Remember, this is a true "As-Is" purchase. Finally, if you are still not comfortable going it alone, many of these companies offer some sort of agent compensation, so talk to your Realtor and see if this is a fit for everyone involved.

Melanie Barker,
Realtor
Yosemite Gateway Association of Realtors www.ygaor.com