Over the years, the trend of Outer Banks real estate auctions has come and gone. Lately this trend and marketing tool is making a comeback. Perhaps one reason is that most auctions are on-line. On-line auctions cost sellers less money. Recent Outer Banks homes offered in on-line auctions were first marketed at well below fair market value. This marketing tactic helped to create a buzz about these properties.
Here are a few 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 then that non-refundable 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.
Auction properties are frequently 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 will not allow you to turn on any 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 normal private sale.
The offer to purchase that the auction company wants you to sign will be different than the standard offer to purchase that the Realtors and the state BAR association use. It’s important to take a close look at that document. Most of these documents 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.” That’s not true with all Outer Banks real estate auctions but it’s best to approach them knowing your closing costs and your risks are likely higher than a normal sale. Furthermore, there are numerous buyers bidding at these Outer Banks real estate auctions. Be careful not to get caught up in the excitement and pay too much. If you have any other questions about Outer Banks real estate auctions or need more information about any property here on the beach then feel free to call Scott Team Realty.