How To Bid on Auctions | Real Estate

The history of selling real estate at auctions can be traced all the way back to the ancient Romans.  Today it is not only possible to buy real property at live auctions; the Internet provides a great resource for previewing and evaluating potential properties.

While the mechanics for bidding at a traditional live auction are important, you need to start the process with a thorough inspection of the property.

This is a critical step as live auctions require escrow deposits in order to participate and have time limits within which you have to close the sale.  You need to walk in to the auction with all of your homework done, starting with a pre-auction evaluation and decision as to which properties are worthy of your bids.

All auction preview sites provide enough information for you to sort through properties of interest.  Educated buyers generally hire a professional home inspector to evaluate the property and use a lawyer to review the terms and conditions of the sales contract for the property.

Once you are sure about a property you need to get a pre-auction commitment from a lender if you will not be paying cash for the property.  This is very important as you need to know how high you can bid on the property.  You also need to know the auctioneer’s commission – which can be as high as 10% of the sale price – to add into your calculations.  If you are the winning bidder on a home and you cannot secure the financing within the time frame specified – usually 30 days – you will in all likelihood lose the escrow deposit you put down to gain entry to the auction.

Although it is possible to register for an auction at the location, many auctioneers allow pre-registration online which helps ensure you have everything you need in hand to participate on the day of the auction.  Generally, you’ll need identification and a cashier’s check in the amount required for the particular auction you are attending.  In almost all cases you will need a pre-approval letter from a mortgage lender or financial lending institution.  The letter needs to be current; usually no more than 30 days old.

Once inside the auction you will be given a “paddle” with a number on it that you will use to bid.  While auctions can be fun, you need to be aware of a few things to keep from getting caught up in the excitement of the moment and overbidding.

First, remember that the auctioneer is there to get the highest possible price for his or her client and they are experts at reading the people in the audience.  As hard as it might be, try to remain unemotional and not provide the auctioneer with any “tell” signals.  

Auctions generally begin with a review of the property details and any changes there might be to the printed brochures you typically get at the start of the auction.  Remember, auction properties are sold “as is.” To bid, simply raise your paddle in the air, quietly and calmly.  

Most auctions have a “reserve” price on properties to ensure they sell for at least that amount.  If the reserve is not met during the auction, the property is withdrawn.  Experienced auction buyers rarely bid on a property until after the reserve is met.

If you’re thinking of buying real estate at auction, it would be a great idea to attend a few auctions as an observer before you actually join in as a real participant.