Buying a property at a Denver house auction does have its downsides. You may be unable to inspect an as-is property beforehand. You most likely will need enough cash on hand to pay the earnest money deposit. The house you purchase may also not have a clear title.
But if you can look past these shortcomings, Denver real estate auctions offer incredible opportunities to purchase great real estate for significantly less than market value. For many savvy investors and aspiring homeowners, that alone is reason enough to head down to the auction house and start bidding.
But you don’t want to go to a Denver auction (or any auction, for that matter) without knowing a few things first. That’s why we have put together this brief beginner’s guide to participating in real estate auctions!
Inspect the Denver Property Beforehand if Possible
You will most likely be unable to inspect the property on the day of the actual auction. However, private sellers and auction companies often offer multiple opportunities for buyers and their inspectors to enter properties beforehand. Take full advantage of these open houses, or request a private visit if one of the events doesn’t fit your schedule. Even if you don’t hire a professional inspector, it’s always best to avoid buying a house sight unseen.
Know the Denver Housing Market
The Denver real estate market is constantly changing, and home prices vary significantly depending on the neighborhood. Before you bid on a home, compare it to other similar nearby homes that have sold recently so you can estimate its approximate market value. Doing so will help you avoid bidding too much for a house – an error that could leave you with an underwater mortgage on day one of homeownership.
Have Your Finances in Order
If you intend to finance your auction purchase with a mortgage, then you must have a preapproval letter from a reputable mortgage letter. You will also require sufficient cash to (A) make a deposit prior to bidding and (B) cover a downpayment. These expenses typically amount to about 10% of your winning bid and are due within one or two days after the auction. This is why it’s crucial to predetermine the highest bid you are able to make. Exceed it, and your financing may fail.
Note that auction companies reserve the right to charge a buyer premium, which usually amounts to 5 to 10% of the sale price – another expense you should anticipate ahead of time.
Here’s yet another glowing reason why you want your financing in perfect order before you place the winning bid: if it isn’t, the seller may not just keep your deposit. They may also sue you for breach of contract, as auction contracts do not have financing contingencies.
Don’t Get Carried Away While Bidding
Bidding at auction can get fiercely competitive, with bidders firing off ever-increasing offers in rapid succession. Don’t get lost in the heat of the moment! Pick the highest price you are willing to pay beforehand, and don’t bid one dollar higher than that amount. Also take care not to get so wound up in a bidding war that you ultimately wind up paying more than the house is actually worth. Prudence and forbearance are key.
Prepare for a Fast Closing
No leisurely closing periods here. Closings are typically scheduled 30 to 45 days after the date of the auction. In other words, it is absolutely essential to line up financing before you start bidding – not after.
If you’re looking for real estate auctions, estate auctions and firearm auctions in Denver, CO, look no further than Colorado Premier Realty & Auction Services. And if you would like assistance selling your own home at auction, then we welcome you to contact us today!