By Meghan M.M. Trimm
Sponsored by Beloit Auction & Realty
Buying houses at auction is beginning to trend. I like to stalk the real estate market. I’m not quite ready to buy a house, but I’m close enough to want to know what’s going on. The Wall Street Journal just wrote about the expanding real estate section on Auction.com. You know an industry has hit when ultra-trendy sites start popping up. When I found Hubzu; I realized we were sitting squarely at that point in time. Hubzu is the GrubHub of real estate: buy it online and after a short wait, it’s yours.
But why? What’s the big deal? How did this trend develop, and why in God’s name should I consider it? Who sells a house that way? Is it financially safe? What are the prices like? Buying something as big and important as a house in a non-traditional way doesn’t seem comfortable. Does it?
When I discovered this trend my skepticism was real. I needed answers. So, I did some further digging. I found some background information that put me at ease– ten great reasons that got me jazzed.
Turns out the rise in properties being purchased at auctions, even at online auctions, has to do with the housing bubble. Lenders are trying new ways to get houses back out in the world and off their balance sheets.
Many of the houses being sold are foreclosures. Other homes being sold by families often just recovered from being underwater; meaning, they once again are worth more than the home-owner paid for them. Traditional reasons for auctioning real estate still apply, including settling estates after death or divorce.
The world is beginning to wake up to this market again. Consumers are steadily increasing large purchase spending over all. 2015 homes sales were as high as they’ve been since 2008. Furthermore, Millennials, like my husband and I, are starting to find work (after graduating into the Great Recession), establish families, and look for stable housing. After all, there’s no place like home.
All these circumstances have set up a point in history where real estate auctions are becoming more and more common place. Internet tycoons are jumping on the bandwagon to speed up and simplify the process. All that’s left is for you and me to decide it’s cool. Then we won’t need a reason to buy and sell at auction. That’ll just be how we do. Maybe.
Here are the simple insights that helped me buy into the idea, so I’m be ready when I’m prepared to actually buy a house. It may just be at auction.
My Top 10 Reasons to Consider Jumping on the Real Estate Auction Buying Bandwagon
- It’s a Buyer’s Market
The housing market hasn’t fully recovered; that means there are still far more houses that need to be sold than there are buyers. Auctions provide an efficient way for sellers to get properties off their hands. That also means it’s an unusually efficient way for you and I to find deals. This beautiful reason sets up all the others…
- You can set the Fair Market Price
Auctions are regarded as unbiased ways to determine the market value of a property, strictly because it is only worth what someone will pay for it. You bid what you want to pay. Your bid becomes part of a trusted system used by governments and financial institutions for centuries.
- Reclaiming Empty Houses Benefits the Community
Foreclosures are often sold at auction as a means of establishing a fair market value. Often these homes have been underwater (figuratively, not literally) for the better part of six years. Many of them sit empty, as previous owners moved elsewhere to rebuild their lives. They are susceptible to vandalism, but also they are just not neighborly. The sooner they can be reclaimed the sooner former owners and the neighborhoods can rebuild and renew.
- Sometimes You Can Buy Below Market Value
January is a great time to buy a house. Nobody else wants to move mid-Wisconsin Winter, so there won’t be as much competition. Auction prices stay low when no one is bidding against you. The trick you benefit from is that closing an auction takes about 28 days, especially if you get financing. You’ll be moving in early Spring.
- BTW, You Can, in fact, Get Financing for a Home Bought at Auction
Sort it out in advance. Once you are pre-approved you’ll know what your highest bid could be. Make sure the house is move-in ready; that’s a requisite for mortgage financing. If it is in need of major refurbishment, you may be able to get a short-term loan for construction. Your decision will depend on your preferences and opportunities.
Properties sold at auction often require legal packs with details which you can comb through to get a good sense of what you’re considering buying. Furthermore, companies like Beloit Auction & Realty often auction property on-site as opposed to a stuffy conference room with nothing but a picture to go from. You can bring a contractor to do a walk through and give you an opinion, or your mom. Maybe both.
- Auctions Sell Everything
From empty lots, to commercial property, to municipal lands, to homes, if you are patient you will find what you are looking for. Did you ever dream of owning a nice big downtown space with a storefront you could rent out on the first floor and a dreamy industrial-chic living space upstairs? Even in a small city like Beloit, there are unique and interesting options coming up all the time. For example, this month Beloit Auction& Realty is auctioning a cute little house and then in February – a two story commercial building in downtown Beloit. Not your thing? No worries. There’s also an adorable historic Brasstown Cottage coming up for auction in January.
- You’ll Know If It’s Yours the Same Day
One of the un-gripping things about home buying is the waiting. Put in an offer. Wait. Change the terms. Wait. The process can take weeks before you find out if you’ve got the house or not. Sellers could go with another offer you may not have known about or reject the offer outright. Auctions do not lend themselves to inertia. Bidding opens and closes in one day. You will know whether you own the house before dinner time.
- Competition is Fair and Square
Unlike the typical house buying routine, at auction everybody making offers on the property you want is in the same cue as you, whether, online or in person. No one can slip a secret bid in after you. You will see and/or hear every increment, and can make a judgement with a clear understanding of what you’re up against and how far you want to go.
- Auctions are Action Packed
Going to the auction is an experience for the whole family–bring your mom. The calling, the competition, the win – or lose – imbues the whole buying experience with a sense of control, impact, and purpose. You’ll feel like a million bucks.
See you at the Auction!