Over the years, the trend of auctioning real estate on the Outer Banks has come and gone. Lately this trend and marketing tool is making a comeback. Offering properties for sale through OBX real estate auctions is coming back because it’s easy to have an auction on the Internet. An on-line auction costs sellers less money than an on-site auction. Over the past couple months there have been a few Outer Banks homes offered in on-line auctions. In most cases the opening bid price is set well below fair market value to create a buzz about the property.
Here are four things to keep in mind when considering a bid:
Auction companies typically want some money held before they allow you to bid. If it is an on-line auction then they’ll want to put a hold on a credit card. Today that amount is frequently $1,000. If you win the auction that money goes to the auction company even if you don’t close on the property. Most times they’ll also want a large earnest money deposit shortly after the auction is over. It could be as much as 15% of the final sales price. Another cost to be aware of is the buyer’s premium. This is money you pay the auction company at closing. Frequently that is 5% of the purchase price. If you are getting a loan to purchase the property then it is unlikely you can finance that amount.
Frequently these auction properties are sold without working power or water. Sometimes the auction company will allow you to turn the power on. Other times they want you to do all your inspections prior to submitting a bid and without utilities. If you are allowed to have inspections after winning the auction then the time period allowed for inspections will likely be much shorter than a private sale.
The offer to purchase that the auction company wants you to sign will be different than the standard Realtor/BAR association offer to purchase. It’s important to take a close look at that document. Most of these are written to favor the seller more than the standard offer to purchase. Lately, I have found that the auction company will not provide a copy of the final offer to purchase to bidders until the auction is over.
It’s common knowledge that the auction company is there to help the seller get the most money for their property. If you are not very familiar with buying Outer Banks property and/or auctioned property then it is a good idea to have an agent working for you. Your agent can help you avoid common auction pitfalls as well as help you determine value so you know when to stop bidding. Some auction companies will compensate a buyer’s agent and others will just provide your agent with minimal compensation. If you have a buyer’s agent then you may be responsible for part of their fee.
Someone once said “If it is too good to be true then it probably is.” Not all OBX real estate auctions are too good to be true but you should approach them knowing the costs and risks. Furthermore, there are numerous buyers bidding on these properties. Be careful not to get caught up in the excitement and pay too much. If you have any other questions about OBX real estate auctions or need more information about any property here on the beach then feel free to call Scott Team Realty.