10 Real Estate Auction Myths
Myth 1 – If I buy a property at auction I will have to produce the total amount of cash on auction day.
Not all auction companies utilize the same terms and conditions, so make sure as a buyer you have a complete understanding of the terms and conditions of the auction.
Most public real estate auctions require a deposit on auction day, and allow 30 days for closing.
The deposit will usually be a flat amount, or a percentage of the total contract price.
Myth 2 – The property is distressed, something must be wrong with it & I won’t find out until I buy the Property.
It is true that one of the primary reasons a Seller will choose the auction method of marketing, is the benefit of selling the property “as-is,” without contingency upon inspections.
However, this does not mean that the condition of the property is being hidden from the potential buyers. In fact, a reputable real estate auction company will use disclosure forms and encourage the seller to disclose all known defects or issues with the property.
In addition to encouraging full disclosure, a reputable real estate auction company will also give ample opportunity for inspections prior to the auction. This allows the potential buyer to make a determination of value based on their own inspections, or an inspection from a hired professional.
As real estate auctions have continued to grow in popularity, more and more sellers are taking advantage of the benefits of auction, and are considering the auction method of marketing as a first choice, not a last resort.
Myth 3 – I won’t get free and clear title on the property or the owner might take the property back from me after buying it.
This myth is based on the traditions of court house step type auctions, commonly referred to as sheriff’s auctions or tax lien sales. In this scenario the owner has a legal remedy to get their property back called a “redemption period.” Each State will have a different time frame for the redemption period.
Most auctions conducted by professional real estate auction companies are not these types of auctions, and redemption periods are not part of the terms and conditions.
In fact, most public real estate auctions conducted by a professional real estate auction company will include in the terms and conditions of the auction that the seller will guarantee title. Title work is performed in the same manner as a traditional transaction, and in most cases, the seller is responsible for the cost associated with the policy. (although this will vary from company to company)
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