Video transcript: Buying a home at an auction

On screen:

Buying A Home At An Auction

On screen:

Angi, Mortgage Banker

Angi:

There's two different types of auctions.

The one auction that's a public auction, and the other type of auctions are the courthouse auction. The pro as far as the buyer is concerned is they are definitely getting a lower price than if the property was listed on MLS and on the open market. As far as the lender's concerned, it was a way to basically get rid of a lot of properties that they had on the books at one time.

On screen:

Chris, Real Estate Investor

Chris:

With houses purchased at an auction, there are generally two key costs that aren't going to be involved with a house that you purchase through an agent. The first being the liens. There's going to be some sort of back payment, back taxes, fees that have been assessed on the property that you're going to have to pay in order to get a clear title so that you could ultimately resell the property. You want to research and find out what those are, so you can factor that in to your buying price.

The second is going to be the fee that you have to pay to the auction house. They get a percentage of the purchase price for holding the auction, and facilitating the sale.

Angi:

You don't know a lot about the property or the condition, so a wise buyer would probably drive by the property and try to take at least a visual inspection, but it's pretty much you are buying as is.

Chris:

Whatever foundation issues, plumbing issues, wiring issues that are involved, you're taking all that on.

On screen:

Ronald, Lawyer

Ronald:

When you buy a house on auction, the one thing is this. We're only talking price. You should've inspected the house by now. You should have looked at the neighborhood.

Chris:

Make sure that you set a price limit. So, what you think the house is going to be worth to you, and don't exceed that.

Ronald:

Real people have budgets, real people have limits. And you don't want to stretch yourself so thin, where you buy a home that you really can't afford, thinking, that's okay, we can flip it.

Chris:

So it's an intense process, but there are deals to be had and value there if you're able to come through it successfully.