Looking for property to buy is something that you have probably dreamed of for many years. Although you may already be familiar with the process of buying a home, hiring a realtor ensures that you are safeguarded. All you have to do is contact the phone number indicated in the ad, visit the house, and make a decision as to whether you will buy it or not.
However, there are different ways houses are sold and the auction is one of them. This is a common way of selling foreclosed properties. These are houses owned by mortgage borrowers who defaulted or haven’t paid taxes on their properties, forcing the lender or tax authorities to auction them.
How Does Auction Work?
Table of Contents
Auctions house have many different types and each one has its own rules. It is also possible to have different rules within the same auction house. Besides, the auction houses must be in line with the state and municipality rules where they are situated.
It is essential to understand the rules of a particular auction you are interested in. For instance, if you are targeting apartments near Kennesaw State University, you should be aware of the auction rules in Georgia.
Types of auctions
Whether online or in-person, auctions will always be categorized into three. For example, an action can use either one or all of these three types depending on your preference.
1. Absolute auction
This type of auction is where the highest bidder wins irrespective of the amount assigned to the bid. You can even win a house with a $1 bid. Absolute auctions usually attract a lot of bidders since there’s no minimum. Government agencies and lenders commonly use it. Once a sale has been closed, there is no room for backing out.
2. Minimum Bid Auction
Here, there is a minimum amount of bid placed on a property. The minimum bid is usually published or announced in advance. If you are bidding in person, then the auctioneer will reveal the minimum bid amount before bidding the property. The minimum bid is usually the balance owed to the lender or tax authority.
3. Reserve Auction
A reserve auction is where bids are viewed more like offers. This means that the seller can either accept or reject the bid. There’s no room to counter the offer, as in the case of a typical real estate transaction. In most cases, the seller already has a minimum bid in their mind but doesn’t want to reveal, hoping to get higher bids at auction. On the other hand, if your bid is below the minimum amount the seller wants, they can decline the offer altogether.
Types of Bids
Sellers typically choose the bidding arrangements they prefer to increase the selling price.
• Open
This is a situation where bidders already know the amount of all existing bids. Most people like open bids because they can see how the competition is going and adjust their bids slowly by slowly.
• Blind
Most sellers prefer using blind bids even if they reduce competition. The entire process is more like bidding on a job. Your work is to place a bid without knowing how other people are bidding. The best way to approach this bid is to make a bold bid up front rather than the wait-and-see technique.
In-person Vs Online Auction
- In-person
This is the most common style of auction and has existed for many years. There are people(auctioneers) in charge of the process and numbered cards are shown to everyone participating in the auction process.
If you are attending the auction for the first time, then you might know even know what’s going on. The best thing is to get the information from the auctioneer’s website before stenting the actual auctioning.
- Online
The internet has made it possible for lenders and other groups to conduct auctions online. Most auctioneers will require you to preregister and prove that you are serious about participating in the auction process.
In general, buying property at auction has its pros and cons. For example, you can easily win a good house at a very minimal price. At the same time, you might end up purchasing a home that’s contrary to your earlier expectations.
