Buying real estate at an auction can be a great way to get a valuable property at a good price. However, you need to avoid some common mistakes when you first start participating in auctions to maximize your chances of getting the best properties out there.
The following are seven things you shouldn't do when bidding on a property at a real estate auction.
Being unaware of the clearance rate of the auction in question
The clearance rate is a figure that helps you understand how well properties have been selling at the particular auction you're buying at. This figure is a percentage, and it indicates whether there is a buyer's market or seller's market in place at the auction.
A lower clearance rate is good for you as a buyer. Lower clearance rates mean properties are selling at lower prices.
Failing to do any research in advance
The more prepared you are, the better you'll do at a real estate auction. It's important to learn as much as you can before you participate in an auction for the first time. Learn how the auction process works. Also, you should learn any auction terms and research the real estate market before the auction.
Being unaware of title status
A title search is essential before you purchase a property. It's not uncommon for properties without clean titles to be sold at auctions. If you buy a property without a clean title, you might end up having to pay off liens or other expenses, so you'll want to be aware of this before you buy.
Assuming you can get more financing than you can
You need to work out financing details before you bid on a property at an auction. Don't assume that you can get more financing than you've already secured. You may face penalties if you are unable to get enough financing to buy a property after you've won an auction.
Showing hesitation when bidding
It's important to be confident when you bid on a property. When you show hesitation, other buyers sense that you are uneasy with the price and are probably not going to go much higher.
Not having a bidding strategy in place
In addition to researching the market and the auction process, you should also do some research on bidding strategies. Put some thought into which bidding strategy will be best for you.
Some buyers find that they prefer to wait until close to the end of an auction to start bidding. This could surprise the lead bidder and provide an advantage in this way. Other buyers prefer to get in the bidding early on to control the auction and quickly drive up the price to knock out some other bidders.
Giving out too much information about yourself
Don't give any more information than you need to at an auction. You don't have to provide information to auctioneers, sellers, or other bidders about your price range or past auction experience. Keep things to yourself to make it as hard as possible for others to anticipate your moves.