Are Home Auctions the Saving Grace?

Home Auctions the "New Craze" but do they save you money? Even if a home is Bank Owned (REO) is it still cheaper to buy it on the market or at auction?



Someone who is addicted and loves auctions (car, live stock, furniture, home, jewelry etc..) as a child thought I would go to school and become an auctioneer.

I was and still am fascinated by the excitement, quickness language, bidding hands in the air and one person out-bidding the other so that one person doesn't get the property you want. (whew! gets your heart pumping just thinking about it)

Well, if you know auctions like I know auctions they run on pure emotion! Did you make the right choice? Do you know when to stop? Do you say to yourself it's only $5000.00 more it's no big deal. But, when you add it all up did you eat away your profits or the big savings you thought you were getting dwindle away?



Let's talk about the Bank Owned Auction that took place Saturday June 23, 2007 at Cal Expo.



1st: You must be pre-qual'd..that's fine you have to be pre-qual'd to buy a home this is a standard practice!



2nd: You must pay a 5% buyers premium once you are the successful bidder. Now, if you are looking for a home on the market all your paying for is gas, unless you have a very good Realtor and likes to drive you around and show you homes!



3rd: You must bring a deposit check/cashiers check for no less than $5000.00.

Once you go into contract on a home purchase there is a good faith deposit that must be paid into escrow that deposit varies depending on how good your Realtor is as low as $100.00 to 1/2 down that's entirely up to you.

It's not dictated by someone who doesn't know your money situation.



4th: You will pay for your own Closing Costs! There are No concessions at an auction!

In this day and age where the market has fallen, more and more homeowners and Banks are giving buyers concessions up to 3-5% of the purchase price of the home which benefits you the buyer.



Let's make it a little simpler using figures:

(actual property at auction)



4 Bedroom

3 Bath

2 Story

with Pool on 3/4 acre lot

in Sacramento near Sac State



Light fixer will cost about $20-$30k in work to make this house shine.

Homes in the area are selling/Sold for $340-$360 with pools.



Was on the Market for $450k, then $364 and then $390



Sold at auction for

$310k

+ 5% Buyer Premium

-----------

Total $326k

+ 5k Deposit check

--------------------------

Total $331k

+ 10k Closing Costs

----------------------------

Total $341

+ $20-$30k rehab work(we'll say $25k to be mid ground)

-----------------------------

Total $366k

________________________________________________







Now, you've bought this home for market value!

So it would have been easier to go after this home when it was on the market at it's lowest price of $364 and negotiate lower and ask for your closing costs, inspections done etc... (and negotiate for the bank to pay for those inspections, they will pay if you ask and we ask for everything!) and on the plus side it it's not coming out of your pocket!



Other example:



Home in Antelope 3/2 (cash only transaction) basically this means the home is probably not livable because it has some issues (code) must be a cash buyer.



Sold at Auction for:

$210k

plus again 5% buyer premium

$11k and

$5k deposit, and closing costs of about $10k which now gives you a

total price of $236k,

now this property had been on the market looking for a cash buyer for $189k,

probably would have gotten this for less and they would have paid for closing costs etc...



The list could go on...so why pay market value and use your own money, when there are banks out there and homeowners (so much inventory) that they can't give away homes! People are giving away trips to Hawaii, cars, cash incentives etc...



The meaning really is don't buy the "hype" you have to do your homework and research in order to get a good deal. You also have to know when to stop!



Remember the old adage...if it sounds to good to be true, it probably is!



If you have any questions about auctions or are in the market for a home call me...lets for over your options and find one that suite your needs!



Steffanee Sadhu

Dynasty Financial

916-746-8790

800-485-8740