Home Auctions

You've probably heard about auctions that happen on the courthouse steps before some properties go into foreclosure. These are risky in that you buy them as-is, with no guarantees that there is a clear title so you may also be buying some debt associated with the home. Plus, you need to have the cash to buy them.

I've been getting emails lately advertising another type of home auction by a local auction company. Reading the fine print, here's some things I found interesting.

- The winning bid pays a 10% "Buyers Premium" over the accepted bid price. While they don't say it, it's like the Buyer is paying a 10% commission.

- You need to give them a 10% deposit within 48 hours.

- There are no inspection contingencies like the 17-day one you typically negotiate in the purchase contract. You're buying the home as-is so doing a pest or home inspection after the bid will only tell the Buyer how much more they will need to spend. They do say this though "Go to at least one of the property previews and inspect the property before bidding."

- There are no finance or appraisal contingencies. If the Buyer can't get a loan in time to close within 30 days, sounds like you may lose the 10% deposit.

- The seller determines the reserve for the auction which Bidders don't know about.
All they tell you is if your bid met the reserve.

- The seller doesn't even have to take the high bid. All the auction does is present the highest bid to the seller for final approval.