Auction: Pros and Cons

“What are the advantages and disadvantages of buying real estate at auction?” – Robert of Seattle, WA

Buying real estate at auctions can be tricky but also rewarding. One of the advantages to buying homes at auction is the price. Depending on the minimum bid and the demand for the property (other bidders), auctions enable investors to purchase properties at discounted rates. Another advantage to buying at auction is the closing time. Many properties purchased at auction close the same day. That being said, auctions generally have a high level of uncertainty regarding property condition. Houses purchased at auction are purchased “as is” without any additional repairs. Additionally, prior access to foreclosure properties is restricted, and unless you pay for an inspection before going to the auction you may have no idea what you are actually buying. However, should you choose to pay for an inspection, you may be doing so on a property you get out bid on. This can spell trouble for investors. If you are not very careful about your maximum bid price, you may be paying too much for a property that is in serious disrepair and needs costly renovations. If you are new to investing, an auction may not be the best route to acquire your first property. We recommend getting teamed up with experienced investors before starting your first flip.