Are property auctions the smartest way to buy a home? It seems these days that every time you turn on the news you hear about the housing market being down and the foreclosure rates at an all time high. We all have to have a place to live, but can we afford to own a home in today's economy? Sure, you can find good deals on houses through a traditional realtor, especially if the seller is trying to avoid foreclosure. But you can find even better deals through property auctions, which occur when it's too late for the seller to negotiate his best deal.
It's okay to feel badly for the former homeowners who's houses are being sold at property auctions, but that doesn't mean that we shouldn't be happy for the savings we're about to incur. Just how is it possible to save so much purchasing a house that someone else couldn't pay for? It's simple really. Until our homes are paid in full, the banking institution to whom we pay our mortgage is technically the owner of the property. When we cannot make our mortgage payments, the bank takes our house back. Now the bank has our house, and somebody else has the money they loaned us to purchase the house. Banks don't deal in real estate, they deal in money. Therefore, the bank does not want our house, just the money that we owe for the house. This is where property auctions come in.
Typically banks work with real estate professionals who specialize in property auctions. The real estate professional will set the date and time of the auction, and usually a couple of open houses to show the home prior to the auction date. Potential buyers will register for the property auctions and subsequently place bids on the houses. The buyer must keep in mind that he must have the ability to complete the transaction, plus normal closing costs, and that there will be a reserve price on the auction. A reserve price is the minimum amount that the seller will accept. The auctioneer will set a starting bid and, as long as the reserve is met, the highest bidder wins the house. Closing usually takes place about 30 days later. At closing, the bank gets back it's money, and the real estate professional gets his fees out of the closing costs or from the bank, depending on the agreement between them. You get a house for possibly less than half of the appraisal value. Talk about immediate equity!
Banks are more than happy to recoup just what's owed to them by the former homeowner, and sometimes less for the sake of unloading the burden of keeping up the house. At property auctions for houses that have been foreclosed on, it is not uncommon for a house to have already been more than half paid for by the previous owner. It is actually quite easy to pick up $200,000 homes at property auctions for significantly less than $100,000. Ask yourself, have you ever seen a realtor negotiate a home down to less than half it's worth? Neither have I. Do yourself a favor. Skip the realtor and look for property auctions.
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