Investment Properties | Real Estate Auctions | Property Investing

Real estate auctions are a great place to find investment properties. In fact, for many it has become a goldmine. It saves a lot of time and eliminates a lot of the hassles involved in traditional deals.

It is a great time to get into the market as an investor. There is a huge supply of houses due mostly to foreclosures. In addition, banks and mortgage lenders have become a lot more conservative in their lending so home owners are having a more difficult time buying homes. Instead, they resort to renting and that is good for the investor.

Here are some basics on how real estate auctions work and how you can take advantage of the great deals that are out there for investors. Auctions make buying an investment property cheap and easy.

Here are the basics you need to know about how real estate auctions work in property investing. These are some of the concepts, terms and practical steps you need to know to successful attend and bid at auctions.

Registering

In order to bid at an auction, you have to register with the auctioneer as a bidder. For most real estate auctions, you can't show up on the day of and register onsite. You can sometimes, but it's not recommended.

One of the reasons you want to do this beforehand is so you can inspect the properties and figure out game plan on how you are going to bid. You have to have a strategy. You have to know what properties you want, how high you are willing to bid and figure out which ones you are willing to pass on.

In addition, you will probably have to provide a certified check or some sort of process to verify that you can afford to buy if you are a winning bidder. This can take a day or two depending on the auction company.

Lots

Each property that is auctioned off is called a lot. You will hear this term a lot at auctions. They classify, identify and organize each property by it's lot number.

Buyer's Premium

Also referred to ask bidder's premium, this is a percentage of the winning bid price that you pay to the auctioneer. It's kind of like a commission. It can be anywhere from 10-15% of the bid price. Just think of it as the commission you would pay to an agent if you were buying the house directly, you're just paying for both sides. In most cases, the deals you get at auction will be so good, the buyer's premium will pay for itself.

Reserve or No Reserve

Many times, especially with high priced properties like real estate, the owner may have a reserve price. This is the minimum price threshold that the owner is willing to go for an item. For example, a foreclosed luxury home might have a reserve price of $1 million.

That means if the highest bid comes in at $900,000, then they won't sell it to the winner bidder. The reserve price is almost always kept a secret. Sometimes if the winning bid is lower than the reserve price, the owner will negotiate with the winning bidder to release the property.

There are auctions with no reserve. These are the best ones to go to because you are guaranteed to be given the property at the bid you put in.

Online Auctions

In many cases you can find auctions online dealing in real estate. This opens up virtually the whole world in finding good investment properties. You can even do overseas property investment via the internet.

Some are timed-auctions. This would be the Ebay styled auctions that are done over weeks or months. The most activity will occur on the last day, and possibly the last hour of bidding.

There are also live webcast auctions that you can attend where you stream the actually event over the internet. Then you can bid buy pressing a button on the online interface the auction company provides.

For online auctions, the registration process is very similar and the bidder would need to also meet the sames requirements as the onsite bidders. In addition, there is usually a 1-2% premium added onto the buyers's premium.

The main advantage of course is the price of properties. Many auctions are run because of foreclosures or because the owner needs to sell their property quick.  Banks who have foreclosed homes don't want to own those properties. They want to get rid of them as soon as possible.

They are in the financing business not the real estate business. They're not looking to get the best prices possible on their foreclosures. And there is a upkeep cost that they have to pay every month that they hold onto those properties.

So you as an investor can take advantage of that opportunity to get great deals on homes. I've seen auctions where a foreclosed home went for as little as $5,000. It was in a mid-sized city in Georgia and anyone can just look at the house and see that it is worth at least five times that amount.

First of all, you can find a ton of properties in one shot. These auctions are usually 1-2 day events where you can bid on multiple properties in a short time frame.

In addition, on your winning bids, all of your paperwork can be finalized within a week of the auction. That means no more going back and forth with an owner, real estate agents, and bankers.

By the way, if you are interested in commercial property investment, the auctions are harder to find and more rare. Also becoming a qualified bidder can be a lot more difficult. But they are out there you can find great deals there as well. The process is similar to residential auctions.