I’ve been trying to find the right house for years and one came up that is perfect, but it’s an auction, not a regular sale. I know rules change from state to state but I suspect there are common concerns/issues across the board, anyone have some insight? Current information is 10% buyer’s premium, which I take to mean “free money for the auction house” and otherwise I don’t know how it differs. Financially, if Zillow is roughly correct on value, I can handle all the costs of the house, but I’m not sure if I’m in for surprises working outside the typical regulatory structure where appraisal, inspection, title search, etc. may or may not apply.
Are you allowed inside beforehand? Can you have an inspection done? Title search could be a big deal or not depending on where you live. Maybe see if you can find any info about the last time the place sold (if any?)
I have only bought three houses before and none of those were at auction so I don’t have direct experience.
Ask questions about inspections and such as already mentioned. Understand whether the purchase is as-is (almost certainly), whether contingencies are allowed (likely not) and things like that. Basically, poke around about the “normal” process and understand what risk mitigation steps are there which won’t be available in this process. That’ll help you understand your exposure. The cheaper price you get at auction vs a traditional sale is basically what the bank is paying you to take on that risk. Decide if the gamble is positive EV or not, including the intangibles like how much you like the place, location, etc…
That’s where I’m at, the intangibles are as strong as they have ever been, so I want to make sure I’m not going in with rose-colored glasses and making a massive error. A small error I can absorb, and the property seems to be in what I would consider a solid B condition, so it’s not like it’s a typical “as-is” that you might see. The big concerns for me are things like title search which I assume could go way, way outside of bounds because it’s paper money and could be massive. The fix-it stuff, I assume I’ll have 20-50k of things I’m not considering but that’s okay. It can’t get away from me fast enough, I guess.
You’ve been down here and have seen the Highlands, where I live right now, which I think are declining a bit. This is across the river with a great access to downtown Louisville, but it also has walking access, just 3-4 blocks, to the strongest “charming” downtown really in 200 miles. Also a big restaurant spot and the natural distance of the river makes it somewhat protected from the whims of shifting neighborhoods. Granted, I would have to become a Hoosier so I would immediately forget how to drive properly, but I can handle that.
I would wonder why it’s being sold by auction and not as a normal sale?
That would be my concern. Was there a murder there? Drug house? Is the foundation an advanced termite mound?
Sounds like you’re covering the bases.
An auction is (I think?) usually a bank selling off a property that was foreclosed or something similar.
The last trip out we spent a bit of time at a friend’s place in New Albany and hit a few restaurants and bars there. Some nice places.
I’d think there might have been a short sale first…have you checked to see if it was listed recently?
If I was buying a house at auction I’d get an inspector to check it out first if possible. You want to know if there are any systems that are old or out of commission. If you can’t get an inspector snag any info on the age of the big ticket items like the heater, AC unit, heat pump, and major appliances. Look for water damage in the bathroom area. Check the roof and foundation conditions.
I have no proof of this, but if the price seems really good, be prepared for a lot of interest. Some of it may be flippers but there very well may be others like you who think it’ll be a great deal. Maybe you can check the area with Redfin to see what they estimate the value to be (and look at surrounding houses to get a feel for what houses sell for in that neighborhood). Sometimes getting comps is difficult but sometimes it isn’t…
Make sure you read the auction rules carefully, they may require a big deposit if you win. You wanna make sure you got the monies available! Also, if you’re not buying it outright would you need to be preapproved for a mortgage? Not sure how any of the financial aspects work here.
Read this as horse at first. Got very confused!
That one’s easy, you just look them in the mouth.
When we were looking at houses in 2018, one of the ones we put a bid in on was a bank auction. It was foreclosed on, and the homeowners had left quickly. It was being sold as-is, not contingent on inspection etc. We were able to tour the house.
We didn’t get it, because we only offered the asking price. I liked the house, it was huge, in a nice suburban/rural area, and had some really nice features. Scary things were, plumbing was off, so no way to see if there were issues, appliances were gone, and painting was needed. It had some amazing features, like wood burning stove in the master bedroom, walk-through closet into a sitting area (or nursery), whirlpool tub. Wood burning stove in the living room, basement partially finished, workshop area, as well as massive storage space (with wooden shelving).
It sold for massively over asking directly to a realtor company, who likely spent money to spruce it up and make a profit.
That being said, yes I did, and it was scary, but also not something that out of the ordinary if you have the cash to spend on any extra costs that might be incurred by the lack of inspection contingencies.
Unless it’s a gift!
Thanks, I’m going to tour it today and see what’s what, not that I’m that sharp on these things. But the auction company will be there so I’ll get to pick their brains on how it all works.
In that case, check the other end for Greek men.
This has been said already, but to reinforce it with some experience - make sure the title to the property is clear. One of my neighbors bought a house that was sold at auction that was in foreclosure. The ‘owner’ had died unexpectedly, there were estranged children, and it turned out one of them had been putting mortgages against the property to the point that it was really underwater. It sat empty for several years while the various banks tried to settle things until finally they sold it at auction with an unclear title. My neighbor got it well under market value but almost no one else bid on it because of the title issues. He’s living with the risk of subsequent legal actions putting his ownership of the house at risk.
I walked the house with the auctioneer, it’s a couple moving overseas so it works a bit more reasonably. Free of liens guaranteed. I’m doing some diligence on title right now, but it looks like a pretty good opportunity, depending on how the auction value goes.
I’ve not bought a house on auction but I want to now. I might look around the Austin area.
Question: I’m not really clear on what title vs. liens actually means. The auction house says it is free of leins, which I take to mean there are no outstanding loans against the house in any way, but what should I look for/understand about title? I guess I don’t know how title can be messed up, I met the current owners, they bought it 22 years ago, so I assume the title is clear, but again I have no idea what sort of actions would muddy it.
The example my lawyer gave was if a prior owner (even before the current seller) didn’t pay off their mortgage or there was some paperwork issue finalizing a mortgage. We got title insurance, imho you should strongly consider it.