Q: I’ve been hearing recently about auctions where companies are supposedly selling all sorts of homes at below-market prices. I’ve seen one of these featured on the local news. As someone who is considering buying a larger home here in Las Vegas, I’m interested in getting your thoughts on this. Can you find good deals on good homes by attending these auctions? Or, is there more to it than meets the eye? — Jayne C., Las Vegas
A: With foreclosures on the rise, as has been widely reported, many people have been trying to get good information on this topic. I asked Neil Schwartz, a Realtor member of the Greater Las Vegas Association of Realtors Board of Directors who specializes in this area. He provided this response:
“Jayne is correct. Recently in the Las Vegas area, several banks that have an abundance of foreclosed properties in their inventory have offered them under the banner of an auction. They usually set a time and a place to have potential buyers come and bid on them in an open forum. You will find these announcements in your local newspaper.
This could be a good source for buyers to purchase a property at a very good price compared to others on the market. To do this, a buyer must do their homework before attending the auction. All the properties recently auctioned by Hudson and Marshall (a nationwide auction house that came to town to present this auction) were bank-owned and all were listed with local real estate agents.
Once you identify a property to be auctioned off, you should contact the listing agent to view the property. At this time, you can view the property to see if it meets your requirements.
The listing agents can provide you with lists of comparables in the area in order for you to decipher the value of the property. If you are really interested, you should arrange to have a licensed home inspector do an inspection on the property and issue you a written report. Most properties sold at auction, however, will have a provision in the contract that the sale is not contingent on a home inspection and is being sold in “as is” condition.
The next step in buying a property at auction is to make sure you have your financing is in order. If you are paying all cash, you will still have to put down about 5 percent of the sales price at the time your bid is accepted at the auction. If you are planning to finance it through a lender, you will need to know up front if you can qualify for the loan. Most auctioned properties are not contingent on the buyer getting financing, which means if your bid is accepted and you pay your 5 percent down, you could lose that money if you can’t perform.
You need to understand that in most auction situations, the winning bidder also may have to pay up to 5 percent of the winning bid to the auction company that is running the auction. As an example, if you are the winning bidder for $200,000, you would have to pay the auction company a premium of $10,000 for that home.
One last thing you should know. There are two kinds of sales at most auctions: the absolute price acceptance, which means that price is acceptable by the owner and you have bought the property; and the reserved price acceptance, which means that the seller still has the final OK in order for the purchase price to be accepted.
In the most recent auction, all the properties received an acceptable bid from the floor, but after the lender had the chance to review the price that the buyer was willing to pay, decided not to accept the winning bid. Make sure you know which properties being auctioned are absolute properties which are reserved properties.
The bottom line, Jayne, is that good deals are to be had at these real estate auctions, but you must do your homework in advance so you have the best chance to purchase a property that will continue to be satisfactory over a long period of time.
Devin Reiss is the president of the Greater Las Vegas Association of REALTORS and has worked in the real estate market for more than a decade. GLVAR has more than 17,000 members. To ask Reiss a question, e-mail him at firstname.lastname@example.org. For more information, visit lasvegasrealtor.com.