For the most part, a property ends up as an auction listing because the owner is unable to sell the property through normal channels or as is more often the case, a fast sale is required. It could be that the property has been put on the market for quite some time and it has been difficult to sell, it has yet to find its buyer.
Most of the time, however, properties put up at an auction are those that have been repossessed by banks or other lending institutions. These are the properties that you should look out for. Repossessed properties are often sold at a reasonable price well below market value for the reason that loan companies want to unload the property right away.
Since banks and lending institutions are not in the business of property investment, they would much prefer to recoup the cash that they have invested by selling the repossessed property quickly, rather than hang on to it indefinitely. As a property investor, keep an eye out for repossessed properties at an auction.
The process of an auction sale can prove to be quite complicated for the novice investor. If it is your first time to go on an auction, it is best to come prepared. Investigate and do some research beforehand. There are some important things that you need to know about any property that you are interested in.
For example, the basic property data that you must have is the property's size, the basic facilities, its previous owner (if any), and more importantly, its guide price at the auction. Knowing the guide price is important because you need to know if you are going to find a lot of competition for the property or not. A low guide often leads to a lot of competition as people tend to chase potential bargains.
To know if you have landed money spinning property, check out the price range of the other properties in the same neighbourhood to see if the one you are eyeing on can be purchased below market value and what your maximum offer should be at auction. Compare its guide price with the sold prices of at least two other properties within close proximity, or those that are within three miles of the property you have in mind.
Also, factor in the amenities that the house may have to determine if the price is right. The number of bedrooms and bathrooms, the presence of added benefits such as fireplaces or swimming pools and the availability of parking space would also govern the asking price and the value of a property.
On a final note, make sure that you are financially able to proceed when you go to a property auction. When the gavel falls, it means that you have entered the winning bid and the property is yours. This also means that you have to pay at least 10% of the property's value as deposit on the very same auction day. You will then be required to pay the balance 28 days later. That's why it's extremely important that before you embark on an auction, your finances are in order and that you are able to afford the price that you have bid on.
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