Auctions

If you are sending out a good amount of offers for yourself or for clients, you know that it feels as if though the selling agent has “Please send your highest and best…” as an auto reply. Once you think about it you will realize that offering on MLS properties has become somewhat of an auction. The worse part about this is that you do not know where your offer stands in comparison as you do when you are actually participating at an auction. Who knows if there are even other offers on the table other than yours.

For this reason, auctions have become more attractive for many investors. Auctions favor investor because in order to bid on properties you must have cash on hand or financing in place. Plenty of the properties at auctions are foreclosed properties in need of major renovations which traditional financing will usually not finance. Therefore, this eliminates the over paying owner occupants that auctions attract. This leaves the cash buying owner occupants but they usually do not buy homes cash passed 80K. If you have ever prepared for an auction, you know that it takes lots of time and man power to properly prepare for one. You must inspect and have a title search done for each property you plan on bidding on.

Now that you have calculated the max offer you know where to stop bidding but you get an opportunity to bid lower until your max is reached. At an auction the bidding usually starts lower than asking price and some of your bids may be lower than what you would have ever submitted as an offer if it were listed. Something you learn is how far off you were from the winning bid. This can assist you in fine tuning your numbers, if needed, or identifying a new ‘hot” area that you previously did not know about or had interest in. You may be able to do this with listings once they close but at an auction you can talk directly to the buyer and discover their reasoning behind their offer if they win the bid. On MLS listings you may be able to track down the buyer or wait until the tax records are updated but it may be more of a headache. An additional bonus to attending an auction is the possibility to work with fellow investors to prevent bidding against each other and trading properties in order to prevent from over paying. By attending local auctions, you will begin to notice that plenty of the same people are attending the same auctions. These are the people you want to identify and begin establishing a relationship with.

The capacity in which you can work with these individuals will be reviewed in depth in the following article. Be assured that the circumstances in which you work with these auction goers will be a win, win situation as always.