The best place to buy investment properties has always been at real estate auctions.  If you are looking for foreclosure auctions, there has never been a better time to do so.  Whether you are a part-time or full-time investor, auctions are the way to go.

Real estate auctions offer the convenience of having multiple properties in one setting, the simplicity of executing transactions within a few days to a week, and the low price that comes with putting up a property for sale for only one day.  For those of you who are interesting in buying investment properties at auction, here are some things that you will want to know before you make your first bid.

Advantages to Real Estate Auctions

If you’ve ever looked for a property for investment reasons, you know how difficult it can be to find a good deal.  In addition, even when you find a good deal, it can take weeks to months of negotiating and paperwork to actually get the transaction done.  Lawyers are involved, real estate agents are involved, bankers are involved, as well as a plethora of other parties.  At real estate auctions, the complexities of getting a real estate deal done is simplified.

In addition, instead of spending hours scouring through newspaper ads and going back and forth from your real estate agent, you can often find a multiple number of properties in a single auction without having to flip through anything. Some auctions sometimes have just one house, but many auctions have multiple properties that go up for sales in one day.

Buyers Premium

There is a premium for the convenience factor.  Usually its anywhere from 10-15% of the winning bid price.  This sounds hefty, but when you think about the money saved just in real estate commissions and closing fees, as well as all of the time saved, the buyer’s premium can be a great bargain.  In addition, if you buy multiple properties in one day, that increases your savings.

Lots

This is what they call the units up for auction.  You can have an entire storage unit as a lot, or a single house.  In either case, if one bid session will win that unit, it is called a lot.  Lots usually have lot numbers associated with them and that is how you know which property you are bidding on.

Reserve

The reserve is a minimum price that the property will go for.  They rarely tell you what that number is before the auction starts, but once the winning bid is won, they will tell you if the reserve has been met or not.  Sometimes there is no reserve.  In fact, in a lot of foreclosure auctions there is no reserve because the banks are just trying to unload their property inventory.  Sometimes, if you are the winning bidder, you will be given the option to negotiate with the seller to buy the house anyways.

Deposit

Many auctions require a minimum deposit to approve you to bid.  They do this to make sure that if you are a winning bidder that you can actually come through with the money to buy the house.  Sometimes they merely ask you to take out a cashiers check made out to yourself for a specific amount, just to prove that you are capable of buying a house.

Bidding Strategy

Bidding at auctions is like a game.  You have to learn how to strategize to make the most of your time and money.  I would advise you, that if you would like to start buying investment properties at auction, to go to a few without bidding.  Understand how they work and what kind of games bidders play to get their way.  You’ll be amazed and maybe even excited by the mind games that go on.

That being said, once you are ready to be a bonafide bidder, make sure that you have looked at all of the properties up for auction and develop a strategy for how you will want to bid.  You should have a max price for every lot that you want.  You should also have a strategy for how you will get the lowest price possible.

Investment Properties

You should know that an investment strategy that involves buying and managing property is very different than other types of investments.  Stocks, bonds and mutual funds are highly liquid, which means you can easily convert it to cash.  Investment property is not like that all.  So beware.  It can make you a lot of money, but it can also be a huge headache.