Properties sold at public auctions currently have some of the greatest profit potential in the real estate market. The number of homes and properties and foreclosures currently on the market is steadily increasing, so the time to take advantage of all of the deals that are available is now.
Before even considering bidding on a property, there are a few things to consider in order to insure the success of the deal. Attending several auctions even if you do not plan to bid on a property, is always a good idea. Familiarize yourself with the whole process and mingle with the other attendees. Not only are auctions a good way to see what is on the market, they are also a good place to network and connect with real estate professionals and others interested in real estate.
Once you have a clear understanding of what the auctioning process entails, it is important to do your homework. Researching the property is key. Make sure that you know exactly what you are getting yourself into. Know who has the title to the property as well financing that is already in place and any liens or encumbrances that are attached to the property. By finding out this relevant information, you can avoid any potential pitfalls and problems.
It is also beneficial that you realize that you are not dealing with the homeowner of the property. This translates to the either a lender, a mortgage company, a bank, or another corporations that has claimed ownership of the property is probably not emotionally attached to the property. They have the right idea. An investor should also avoid an emotionally attachment to any property he/she is attempting to bid on. Whether you are planning to keep it, flip it to another investor, or sell it, it makes more sense to just simply consider the property as another potential option for profit.
In addition to the many advantages, such as higher profit margins in a short period of time, an investor should also consider the risks involved. Disadvantages to buying a property at auction is not without its share of limitations and requirements. Deals are typically closed on an all cash basis which means that there is a lot of money necessary up front. Also, most of these homes are sold “as is” and investors that have not had the property properly inspected are at a definite disadvantage. Always have the property viewed and checked prior to bidding on it.
Evaluate, the time, effort, and sweat equity you are willing to put into the house. If a house is in a good location but needs a lot of work, it still may prove to be profitable. Most properties that are structurally sound and do not have costly issues with plumbing and electrical, may still prove to be profitable.
It is also a good idea to know if the property is vacant or currently occupied. Dealing with the eviction process is never easy and if can be avoided, that is a definite plus. In addition, it is important to note whether or not current tenants are a part of the package. Some purchase agreements require the maintenance of current tenants. So although, this situation may not be problematic, especially if a buyer is planning to rent the home, it does offer some limitations that may be avoided if this contingency did not exist. Spending some time doing your homework will lead to less potential headaches and unforeseen problematic situation.