Purchasing a Home through a Mortgage Auction: The Risks

There are many factors to be taken into consideration before attending a mortgage auction and bidding successfully for any property that you might wish to own. The great attraction of buying at auction is that you can get property at a much cheaper price and at a faster pace, than through the usual conventional means, if you do your homework right.

First Things To Do

Request a catalogue from the auction house and after choosing any property that suits you, note the viewing days when you can visit what you will be bidding for.

Research

After you have indentified your property, do some research through asking neighbors or local estate agents where the property is situated, whether it is a quiet place or there are some hot spots which might not be to your liking. The local energy rates, when garbage is collected and at what time, how far off are the local shopping outlets, etc. Things which might seem unimportant but which might make a difference in your lifestyle.

Another important aspect of research is the one you do to find out about the property itself and the land it is built on. First inspect the condition the property is in and then get advice from a lawyer or notary who can do research for you, to find out whether there are unpaid bills or unpaid taxes connected to the property. Some auction agents do provide this kind of legal documentation provided by the seller’s lawyers. Always ask first, as this can save you a hefty legal fee. An important, sizeable fee which you can’t avoid is the one you pay to the building inspector who will check the building’s foundation for leaks or insect damage which might cost a small fortune to fix.

Money Matters

Get your money matters in order by getting approval for a mortgage loan before any bidding starts. Bidding can be made privately to the owner but there is no guarantee it will be accepted if the owner thinks he can get more at auction. There are penalties if you bid for a property and can’t get the needed sum of money. Remember that as soon as the auctioneer’s gavel hits the table you are legally bound by a contract to pay.

Preparing Yourself

Before the auction day, visit the auction room to familiarize yourself and if you are a newbie to auctions, attend one to get yourself acquainted with the signs and lingo used in auctions. On the day, get yourself a good place where the auctioneer can readily see you and be sure you know your budget and how far you can go with it, because it is easy to get carried away in the heat of things. Remember there might be auctioneer’s fees to be paid, so check what these might be before setting your budget. If you are buying as a business venture and not as a private residence, the mortgage fee might be higher.

Taking everything into consideration, there are risks when purchasing a property at auctions but most can be avoided if you do what you have to beforehand, and keep a cool head when bidding.