FREQUENTLY ASKED QUESTIONS FOR BUYER
- What are the advantages of buying real estate property at auction?
- What is the most important thing to know about buying real estate at auction?
- What does it mean when property is sold in "As-Is" condition?
- How does a potential buyer inspect the property?
- Can a Broker/Agent be used at a real estate auction?
- Is the deposit refundable if high bidder decides not to buy the property?
- Is the high bid always the total amount paid for the property?
- Can the contract be contingent upon financing or inspections?
- What is the difference between an "absolute" auction and a "reserve" auction?
- What are the Terms and Conditions of the sale?
- How does a bidder register at a real estate auction?
- How does the bidding process work at an auction?
- What are the high bidder's obligations?
Q: What are the advantages of buying real estate property at auction?
A: Purchasing property at a real estate auction allows buyers to experience a quick transaction. The auction method eliminates lengthy negotiations, provides the assurance the high bid was current market value, and shortens the length of closings. By researching the property before the auction day, potential buyers can bid with confidence and know the property is being sold at a fair price, because the highest bidder only has to bid one increment over the previous high bid to win.
Q: What is the most important thing to know about buying real estate at auction?
A: Buying real estate at auction is a simple process. It is important for bidders to be well informed about the property prior to auction day. Potential buyers should inspect the property prior to bidding, evaluate what the property is worth, and arrange for financing. If bidders are prepared, buying real estate at auction is a fun and efficient process.
Q: What does it mean when property is sold in "As-Is" condition?
A: The material defects of a property, known to the Auctioneer prior to the auction, will be disclosed to all bidders. However, at a real estate auction, the Auctioneer does not make representations, guarantees or warranties as to the property's condition. The property is sold in whatever condition it is in the day of the auction. Buyers should conduct inspections prior to the auction in order to know the condition of the property on which they are bidding.
Q: How does a potential buyer inspect the property?
A: Typically a property is open for inspection during a series of open houses. Some sellers may choose to show properties by appointment only. Specific information will be available in the auction brochure and in advertising materials.
Q: Can a Broker/Agent be used at a real estate auction?
A: Each auction is different, but most real estate auctions welcome Real Estate Brokers/Agents to represent a buyer at the auction. The auction Terms and Conditions of Sale will clearly outline the use of outside Brokers/Agents. However, it is not required to have a Broker/Agent in order to bid at an auction.
Q: Is the high bid always the total amount paid for the property?
A: Although not used in all regions or at all auctions, a buyer's premium may be added to the high bid to reach the final sale price. The buyer's premium is a percentage or an amount added to the high bid to determine the total purchase price to be paid by the buyer. For example, if the high bid is $100,000 and the buyer's premium is 10%, then the buyer's premium is $10,000 ($100,000 x 10%). The $10,000 buyer's premium is added to the high bid to establish the total purchase price. Closing costs, as applicable, are the sole responsibility of the buyer unless otherwise stated by the seller. Refer to the Terms and Conditions of Sale of the auction to verify if a buyer's premium and/or closing costs are applicable.
Q: Can the contract be contingent upon financing or inspections?
A: The auction contract is contingency-free. It is important that potential buyers inspect the property and arrange for financing before the auction.
Q: What is the difference between an "absolute" auction and a "reserve" auction?
A: An "absolute" auction (without reserve) means that the property is sold to the highest bidder, regardless of price. A "reserve" auction (subject to confirmation) gives the seller the right to confirm the high bid within a specified time after the sale. Unless advertised as "absolute" and disclosed in the auction Terms and Conditions of Sale, auctions are considered to be "reserve" auctions.
Q: What are the Terms and Conditions of the Sale?
A: The sale is administered based on the Terms and Conditions of Sale of the auction. The Terms and Conditions of Sale provide information on the required deposit, closing date, etc. All bidders should become familiar with the Terms and Conditions of Sale prior to the auction. Note that at an auction sale, any announcements made by the Auctioneer on the day of sale take precedence over previously published or verbally conveyed Terms and Conditions of Sale.
Q: How does a bidder register at a real estate auction?
A: Registration is typically done onsite on auction day. Most registration processes require valid identification (driver's license) and some auctions require bidders to present a cashier's check prior to being given a bidder card. The highest bidder for a property will be required to make a deposit on auction day immediately following the conclusion of the auction.
Q: How does the bidding process work at an auction?
A: A successful bidder at a real estate auction is the person who is willing to pay more than anyone else for the property. Bidding can start when the Auctioneer asks for a specific amount or when a bidder offers a starting amount. Once the bidding process begins, the Auctioneer will request incremental increases that can be accepted with the raising of the bidder's bid card. The bidding stops when the Auctioneer is unable to solicit a higher bid.
Q: What are the high bidder's obligations?
A: Once the Auctioneer accepts a bid, by law the high bidder is obligated to the sale. It is important that bidders are aware of this before the bidding process begins, as Auctioneers are not obligated to let a bidder back out of a purchase. The high bidder must execute the Real Estate Purchase Agreement and make the required Earnest Money Deposit. Even if a down payment is not made, the high bidder can still be held accountable and sued over a retracted bid.