Do Your Research, Secure Your Financing, and Follow the Rules to Increase Your Chances of Buying Your Dream Home at a Luxury Auction.
Many of us fantasize about landing our dream home at an affordable price. While this may remain a dream for some, it can be a reality for others if they find their perfect home is available at a property auction.
​​​​​​​To succeed at an auction, however, you’ll need to be properly prepared. Bidding on property at luxury auctions is a learned skill. You should not expect to simply attend an auction once and scoop up the home of your dreams for a deep discount. Whether you attend auctions in person or check out high-end property auctions online, there are some things you need to know before you can be successful. Here are five of the most important.
1. Do Your Research
You would never make an offer on a home without researching it, making sure its value matched its selling price, and determining how much work it would need before it met your standards. The same goes for buying property at luxury auctions. Most auction companies will post information on the property approximately a month and a half before the auction takes place. Some even have open houses either virtually or in-person, so you can take a look at the property before you bid on it. In some cases, you can even bring your own home inspector to the open house to determine exactly what kind of condition the home is in. Make sure you ask someone at the auction house whether you will be able to see the home in person and whether they allow pre-auction inspections. If they don’t, you may want to reconsider bidding.
All of this research is recommended for potential buyers who are trying to land their dream home at high-end property auctions. It will help you determine whether the home fits your needs and how much you should bid on it to get a good deal.
2. Register Early
The last thing you want to do is arrive late to an auction and find that the home of your dreams has been sold for under market value. That’s why it’s important to register for and show up to both in-person and online luxury auctions early. If you attend in person, you’ll have the opportunity to position yourself in an area where you feel comfortable and can see other bidders. If you’re attending high-end property auctions online, logging on early ensures you have time to fully register and get your bidding number and get comfortable before the bidding process starts. If you arrive at an auction late, you’ll feel stressed and unprepared and may end up making an emotional decision or losing out on a property you had your heart set on.
3. Know Your Budget
Buying homes at luxury auctions is no different than buying them in a traditional way. You need to know what your budget is and make sure you don’t exceed it when you put in an offer or make a bid. One good strategy when determining what you will bid is to set your maximum amount above a round number. For example, if you think $600,000 is your upper limit, decide if you can stretch that to $604,000. This can help you win out over bidders who have set the same budget as you have.
Whatever you decide you’re willing to bid, make sure it fits within what you’ve been able to secure for financing or with how much money you’ve saved to buy the property in cash. If this is a first home or a major upgrade from your current home, you should also make sure to take into consideration the extra expenses you’ll incur when you buy the home. These can include HOA dues, increased taxes, home maintenance fees, and higher utilities. Also keep in mind that some auction companies charge a 5 or 10 percent buyer's premium onto the sale price, so make sure you include that in your budget as well.
4. Have Financing in Place
Treat high-end property auctions just like you’d treat regular home shopping by having all your financing in place before you make an offer (or a bid). Some auction houses will require cash or a cashier’s check if you win a bid, while others will at least want to see a preapproval letter from your lender. To buy a home at auction, you have multiple options for financing, including the traditional 20 or 30-year mortgage, a loan from a hard money lender, or private lender financing. Whichever choice is right for you, get your ducks in a row with the loan before you register to bid at a luxury auction.
5. Follow the Rules and Be Ready to Close Quickly
All auction houses, whether they hold high-end property auctions in-person or online, have their rules. If you don’t follow them, you can lose your deposit or even be sued by the seller of the property you bid on. Make sure you’re aware of these rules before you join the auction. If anything is unclear, ask someone from the house to explain. If you do win the bid, follow the rules, have your financing ready to go, and be ready to close fast. Most auction houses require you to close within 30 to 45 days after the close of the bidding, so you’ll need to be prepared to move quickly once you’ve secured the winning bid.
It’s not often you’ll find potential dream homes available at high-end property auctions. However, if you stay persistent and continue to research what’s hitting the auction houses, you could get lucky. Make sure you’re prepared for that moment by following the above five tips and by working with a real estate agent who has helped other buyers through the auction process. When you work with a real estate agent who has experience with luxury auctions, like Chad Roffers, you’ll increase your chances of landing your dream home for a price you never imagined.