Types of Property Auction: Know Your Basics

Contrary to what people generally think, a property auction can help you find your next investment deal faster than anything else. Nowadays the housing crisis of the yesteryears might seem like a distant memory, but you can still find properties that are being foreclosed (mostly by banks) in property auctions. This marketplace gives you the wherewithal to get ahead of the competition, boost your business, and use properties being sold by banks to your advantage.

Let’s take a look at how you many types of property auctions are there.

Property Auction

Trustee sale or real estate auction is another term for property auction. Basically, it means that a property is being sold to the public where investors can put their offer, seeing as how these places are priced at a below market rate. This often makes property auctions attractive for investors.

Properties that tend to end up being auctioned like this are those when their owners default on their mortgage payment. After several months of not paying it, the lender (typically a bank) takes the property back. These homes may be put on the market for lower rates after the passage of a few months or even a year in case the borrower doesn’t pay their mortgage.

Experienced investors can make good deals out of these auctions if they know the process well beforehand. One big advantage they have here is that properties here are cheaper than those which are found at a listing. Generally, you may find properties as cheap as 13 percent of their average estimated market value, as per RealtyTrac.

The reason why the prices are lower? These properties tend ot come with some risk, and may also be a bit unkempt if their last owners didn’t take care of it. Plus these properties may not be that much in demand.

But as an experienced real estate investor, you can do well to go through all the pros and cons of getting a property on auction. Read on to know how you can bid like an expert, and how many types of property auctions are there.

Types of Real Estate Auctions

In the market, you will be likely to find properties facing foreclosure or bank-owned ones in these auctions. Both of these types of properties can help you. Since some investors tend to avoid bidding at these auctions, savvy investors can make this work to their advantage.

Here are the three types of auctions that happen:

·         Foreclosure auction

·         Vacant REO auctions

·         Occupied REO auctions

Foreclosure auctions                

These are typically held at either the property itself, a local court or a convention center. It may be auctioned off by a sheriff, trustee or an auctioneer. These are the kind of auctions where you get to network and get some great deals in the process.

Occupied REO auctions                         

These are auctions that commence immediately as a property forecloses. If it doesn’t sell, the property becomes bank-owned. It is important to remember that in ‘occupied’ REO auctions, someone is still living in the property. Also, when dealing with an occupied REO auction, the lender is directly moving the property without as much as changing the title, kicking out the occupants, and getting embroiled in maintenance issues. All these aspects make occupied REO properties difficult to get ready for buyers. However, one advantage they do offer investors is that they are inexpensive since no added work is involved in owning it.

Vacant REO auctions

These are auctions where you get, you guessed it, vacant properties. These places don’t have any people staying in it, and they’re ready to be moved. It’s almost similar to how you could traditionally buy and sell a home. Investors should know that these places come with pre-existing terms and that they can check it out at a scheduled open house.