2.6 min read
If you think about buying a home, you probably consider buying a house at auction. Auctions are helpful for those willing to be patient to get an excellent price on a home. There are, however, numerous myths surrounding buying homes at auction. For example, one common misconception about auction homes is that they are cash-only. But this is only sometimes the case! It depends on the auction. For our purposes, we will examine the difference between foreclosure auctions and standard (non-foreclosure) auctions.
Just because you have cash available doesn’t mean you want to spend it all on the house. In truth, if you have good credit, your money may be better off in a steady-growth investment. Also, it will likely yield higher returns than the low-interest rate you can get on a mortgage.
On the other hand, if you don’t have money available at all, there is still hope for you! Standard home auctions can use cash, but it is not a requirement. For example, you can apply for special financing, personal or private loans, or even hard money loans to purchase an auction home.
Everyone prefers cash. But, in standard auctions, you don’t have to pay out of pocket if you don’t want to!
Now, foreclosure auctions are a different story. Private financial institutions or HUD (The US Department of Housing and Urban Development) sold these homes. You have to understand; foreclosures occur when borrowers default on their loans and the houses are repossessed. With that, sellers at foreclosures auctions are interested in recouping their losses as soon as possible. For this reason, foreclosure auctions are cash-only.
Furthermore, there is no way to get around the cash-only requirements. The auctioneer will specifically ask that each bidder provides proof of their cashier’s checks and amount before that person is even eligible to join the bidding. If you don’t have the cash, you are not part of the auction!
How Do I Participate In A Home Auction?
Whether you are planning to use cash or not, knowing how to join a home auction is essential. First, you will be checking for auction announcements. Typically, there is at least a 30-day window between the announcement and the actual auction. It gives potential buyers plenty of time to familiarize themselves with the property and double-check their numbers.
Next, you should get your financing method pre-approved to ensure you are prepared to purchase after winning a bid. Then, register as a bidder as early as you can! It is also a great time to get your questions answered by the seller’s agent.
Lastly, make sure you are paying close attention to the bidding. Home auctions can be over quickly, depending on how the bidding goes. If you stay within your price range and win the bid, you may be ready to finalize your deal with the seller soon after the process begins!