Contrary to popular belief, properties up for auction can be inspected, with the exception of those auctioned by a county or involved in judicial auctions.
Buyers do not have to pay the full amount in cash, as some mistakenly believe; but they do have to present a 5 percent to 10 percent earnest money deposit and a mortgage preapproval.
While sellers pay a fee to cover the accelerated marketing process, auctions can cost them less than a traditional sale by moving the home quickly and minimizing carrying and maintenance costs. Additionally, sellers generally do not lose money at auction, as an auction typically determines the home’s true value and competitive bidding can even increase the price beyond that.
Sellers also benefit from setting terms other than the price, such as timing and lack of contingencies.
Another myth tied to real estate auctions is the belief that agents and brokers cannot be involved in the process; however, they actually play a role by referring clients, serving as a cooperative broker/agent, or acting as a listing broker/agent and earning a commission.
If a home fails to sell at auction, it can impact later buyers’ perception of the property. But experts say that’s fairly rare – that most properties do sell at auction, and pre-sales are popular.
Finally, it’s important to note that sellers only have to accept the final bid, regardless of amount, in a reserve auction; and first-time buyers – not just investors – attend auctions.
Many sellers without a hardship or even need to sell quickly choose an auction because they want to take advantage of the accelerated marketing process and 30- to 45-day closing.
Source: RealtyBizNews (04/24/13)
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