The Basics of Buying a Home at Auction
September 5, 2023
The Basics of Buying a Home at Auction
The number of homeowners facing foreclosures is approaching a 20-year low. but there are still massive opportunities when it comes to finding distressed properties. One of the best places to take advantage of these opportunities is through an online residential real estate auction.
Online auctions yield plenty of options, including foreclosures, short sales, and REOs. All of these property types involve many steps and potential challenges. Below, we’ve identified the different steps of buying a property through an online auction and illustrated how this technology has solved some of the challenges presented in more traditional homebuying scenarios.
Online platforms facilitate the auction process
Finding the right online platform is the first step in searching for a property at auction. For instance, Hubzu, which is a leading online marketplace for end-to-end real estate auctions, amplifies exposure of each property through extensive multi-channel promotion, including syndicated websites, digital advertising and local marketing campaigns. This substantial investment in marketing strategy works in tandem with data management and analytics to establish the right buyer demand. This means that buyers aren’t competing against robots and scammers. Having more than 1.6 million users with access to the platform, increases improved sales outcomes.
The benefits of buying a home at auction
The major benefit of buying at auction is that many properties online will have competitive pricing. Traditional real estate transactions often put buyers and sellers in limbo, as one party might be ready to sell, while the other might not be ready to buy. Online auction marketplaces ensure that only motivated buyers and sellers are participating in the real estate transaction.
In addition, bidders may often be licensed agents and brokers leveraging online platforms and search tools as well as an automated bidding process to help reduce buying times for their clients.
Challenges of real estate auctioning—and how to avoid them
While there are major benefits to buying at auction, it’s important to note that some properties end up at auction for a reason. Some properties, for example, may have sat vacant for a long time, or they need a lot of maintenance or repairs. The longer a property is on the market, the worse it often is for both buyers and sellers. Fortunately, online auction platforms can help identify and alleviate some of these risks by eliminating protracted sales timelines and performing a certain amount of due diligence.
In addition, it’s difficult for investors and other individuals selling properties to weed out buyers who aren’t qualified. The right online auction platform performs the same quality due diligence on all potential buyers, which means a fair auction process. The right platform should verify the identity of each bidder and understand their bidding and buying history. Furthermore, the platform should provide fully transparent bidding history to all users, so that it’s not possible to be out-bid by people without a reputable homebuying record.
Data is crucial to making good decisions when it comes to property purchases. Therefore, finding platforms with sophisticated data aggregation and modeling algorithms help lead to better decision-making power for buyers and sellers. Online auctions, which have an ability to handle vast amounts of data, mean that homebuying feels simplified, and even demystified.
How to buy a property through an online auction
Search for the right property:
With online auction platforms like Hubzu, potential buyers can search for homes by address, city, state, ZIP code, county, MLS ID or property ID. With a simple search, it’s possible to see how many properties are available, the number of bids placed, the time left in an auction, the current bid and photographs of the property.
Finding information about property specifics:
Once a property has been identified on the platform, online auction platforms allow buyers access to crucial information, including documentation such as the historical tax and list pricing on the property, local school information, and RentRange reports that help investors make informed real estate decisions.
Sign up for the auction:
Once a prospective buyer is registered in its system, an online auction can track properties of interest. If a preferred property isn’t available, the platform can provide information to prospective buyers as soon as a property meets specific search requirements.
Ensure the right financing:
It is important to ensure that the right financing is in order before a bid is placed. The bidder will be asked to show proof of funds (cash, pre-qualified or pre-approval letter from a bank) either during the bidding process or immediately after. Once the bidder has won an auction, they are expected to close in 15-45 days from the day the auction ended.
Start bidding—and winning:
Online auctions can move fast. For that reason, buyers should make sure that the auction is still happening at the same time they want to start bidding and utilize product features such as real-time SMS notifications on auction outbids, auction end times, foreclosure auction alerts, auction bid prices and new properties. After winning an auction and paying for the new property, buyers will then receive the title for their new property.
Interested in learning more about how to buy or sell a home via online auction? Learn more at Hubzu.