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We’ll Think About It – 3 Steps To Not Miss Out On Your Dream Home

February 1, 2013 By Leave a Comment
Houston Real Estate

Houston Real EstateBuying a home is a huge decision.  Whether for personal use or as an investment, it is totally understandable that you would want to weigh your options before making up your mind on which home to purchase.  Here’s the problem: in many parts of our area, homes just aren’t on the market long enough for you to make up your mind.  The result, obviously, is disappointment that you missed out on the home you want.

So, what can you do about it?

Here are three steps to help you avoid disappointment and, instead, get excited about your new home:

1) Know Your Market

By knowing certain criteria like what the average days on market are, what the average prices in the area are, and a sales history for the area you are looking, you can save yourself a lot of time and effort trying to figure it out.  The best way to get that information before you go out looking is to contact your trusted, local Realtor.

2) Know Your Criteria

Very rarely does the “perfect home” show up in your search.  It may seem like it on paper or in pictures, but just like those profile pictures on dating sites, the reality is usually different.  Know what you want before you go looking.  Know the things that you are willing to compromise on like bedroom sizes or outside living.  Know what you are willing to do after you move in like add a patio or put in wood floors.  As important, know what you are not willing to compromise on.  By being able to weigh the pros and cons while you are in the home, you will save time making that decision afterwards.

3) Have Financing Lined Up

Most sellers today are requiring a pre-approval prior to purchase or, if you are paying cash, will require proof of readily-accessible funds.  Before you go look for a home, get with a lender and get a pre-approval letter.  Doing so will save you valuable time waiting on that before you submit an offer on a home you love but someone else already bought because they were prepared.

The bottom line is that in areas of the market where demand is high, inventory is low, and homes that are priced right are selling, you will likely have a brief window to get your offer in before the home is sold.  The “read between the lines” part of that statement is that the good homes, the ones you are probably going to want to make an offer on, will be the ones that go quickly.  What we are seeing today is a sever tightening of available, quality inventory.  As that trend likely continues through the rest of this year, there is going to be a shift to a “seller’s market”, driving up prices.

When I started in the industry, selling new homes, I used to keep a sign in my office that simply said, “The home you are going to thing about tonight is the same home that someone else went home to think about yesterday.”  It was true then and is true now.  Don’t miss out on your home because you needed to go home and think about it.

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E-Pro Certification

February 1, 2013 By 1 Comment
Houston Real Estate

Houston Real EstateAs more and more consumers begin their search for real estate-related information on the Internet, it is critical that real estate professionals stay on top of the latest technology for the benefit of consumers and real estate practitioners alike. The e-PRO Technology Certification Program fills that need.

Realizing the importance of technology training, the National Association of REALTORS® (NAR) created a comprehensive Technology Certification course in 2000. And now that course, e-PRO, has been completely updated to include information on Social Media and Web 2.0 aspects that is, and will continue, to change the real estate business.

“The real estate industry has undergone a fundamental change over the past five years,” Chance Brown said. “Today, more than 90% of all buyers and sellers begin their search online. As an e-PRO certified agent, I have knowledge and tools needed to provide my clients with the information they need and the customer service they demand. It’s both hi-tech and hi-touch.”

The all new e-PRO certification course — the only technology certification program offered by NAR — is designed to prepare real estate professionals to make the most of Internet technology and to identify, evaluate, and implement new Internet business models. The elite group of course graduates represents only four percent of all REALTORS in the country, including Chance Brown of Chance Brown Real Estate.

The e-PRO certification course is an educational program unlike any other professional certification or designation course available, comprehensive and interactive. It is specifically designed to provide real estate professionals with the technology tools needed to assist consumers in the purchase or sale of a home.

The exclusive e-PRO certification course is presented entirely online and certifies real estate agents and brokers as Internet professionals. The course is designed to help REALTORS stay at the leading edge of technology and identify, evaluate and implement new Internet business models.

Once completed, the e-PRO certified real estate professional joins the ranks of a special community of highly skilled and continuously trained professionals who provide high quality and innovative online-based real estate services.  Consumers can identify the e-PRO through the exclusive e-PRO Internet Professional logo.

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Case-Shiller is Crap

October 18, 2012 By 1 Comment

Houston Real EstateThere are few things that drive me more crazy than national news agencies telling me what the real estate market is based on what is happening in either New York or LA or because of some foolish index says.  I think it is irresponsible, unprofessional, and, more importantly, wrong 90+% of the time.

For those of you unfamiliar with the Case-Shiller Index, it comes in a few varieties.  The one most commonly referred to in predicting real estate market trends, specifically pricing trends, is a 20 city composite of sales price data.  There is also a 10 city composite and a couple of others.  Now, while I believe that Kase, Shiller, and Weiss, the guys who came up with it, had the best intentions when it comes to compiling reliable data on pricing and market trends, it has been co-opted since they sold out to Fiserve and S&P.  They even trade futures on the Chicago Mercantile Exchange based on the data.

There are two major reasons why I really don’t like this format for looking at national housing data market.  The first is that it is inherently flawed in that real estate is hyperlocal, not national.  Second, it omits some of the most active markets in the US.

Real Estate is Hyperlocal, not National

So, let me ask you this: If you needed to know the weather in Houston, TX this weekend, would you look at the weather in Boston to predict it?  Of course you wouldn’t.  It’s really the same problem as national political polling.  Who cares what is happening in Ohio if you live in Colorado?  It is an even bigger mess when you take the Electoral College into account.  Why even do a national poll on presidential politics?  Now, you might think, much like the Dow Jones Industrial Average, that taking a composite of the larger real estate markets out there might give you a good idea of the big picture, right?

Well, again, that is a fairly flawed premise.  The reason is that inside of each city you experience a more local version of the national problem.  For instance, in the Chicago real estate market, there are enormous shifts in sales prices and activity throughout the different areas of the city.  Telling me that my house won’t sell in Chicago because an index of the entire city says it won’t is nuts.  I need to know what is going on in my neighborhood.  I need a local Realtor to pull sales data and show me current trends that affect my property.

Where’s The Beef?

So, you can find the index cities by checking Wikipedia, but let me give you a brief synopsis.  It has a bunch of big cities and metro areas in it.  However, it leaves a few of the big ones out as well.  The crazy bit is, that since the inception of the Case-Shiller Index in the early 90′s, it has left out one of the hottest and largest housing markets in the country, Houston, Texas.  It also leaves out Austin and San Antonio, Texas.  Why is that important?

The Case-Shiller Index has grown in popularity with the growth of around-the-clock news organizations, particularly those that are business oriented, i.e. FoxBusiness, MSNBC, CNBC, etc.  It has also become an ever-increasingly popular measuring stick since the downturn that hit the US housing market in 2007-ish.  During that time, Houston, Austin and San Antonio have set the pace for the US real estate market, along with the Dallas-Fort Worth Metro, which is included in the Index.  So how can you tell me that the US housing market is terrible when you are missing the 4th largest city in the country and 2 of the other top 10 markets in the country during that time period?

Believe me when I tell you that I don’t need to be told that the housing market in Detroit is terrible.  In fact, I would argue that Detroit should probably be dropped from the index.  I would call Detroit an extreme outlier.  In stark contract, especially in the past 5-6 years since the housing downturn began, the Great State of Texas has been the driver of the national economy.  As such, the Texas markets should be included if you want to paint an accurate picture of the national market.  I mean, if you’re going to include Tampa Bay and Cleveland, don’t you at least think that Houston ought to be in there?

So, as you can see, I put very little stock into this measurement and I think you should completely ignore the national news media if they tell you the sky is falling.  In every market, in every city, there are good times and bad.  Real estate is a historically cyclical corner of the economy.  My advice to you, for what it is worth, is find a local Realtor who know the market and get a local opinion, based on hyperlocal data, and not from a talking head in NY, LA, or Atlanta.

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Finding The Right Home For You

August 23, 2012 By 1 Comment

Houston Real EstateThe National Association of Realtors has research stating that over 90% of home buyers start their home search online.  I can certainly attest to that.  Fact is, most of the buyers I work with are sending me a list of properties that they have seen online and want to go view.  While the internet has proven an invaluable tool for buyers and sellers, it is not always the best when it comes to picking homes to view.  It might seem counter-intuitive for me to say so, but I will explain.

Hit The Target

Think of your home search as a Target.  You want to hit the bullseye, right?  You want to find that perfect home for you and your family that meets all your needs and wants, has great schools and resale value, is close to everything, private, safe, etc.  Hitting outside of the bullseye isn’t getting all you want.  Sound right?

Let’s take a look at the target from a different perspective.  Let’s look at the outer rings as the area you are looking in.  Then the rings just in from there as the specific community.  Moving closer to the bullseye is the street the home is on.  The first black ring is the house itself.  Then, you hit the bullseye.  Inside the bullseye, the area, subdivision, street, home, price and everything else is just right.  That’s where you want to be.  You want to be in the perfect home.

So, I ask you this: Can you really get there by looking only on the interwebs?  Chances are, the answer is no.

So, my proposal to you is to keep using the internet as a tool to look at things you like in a home.  Find a selection of properties that have attributes that match what you are looking for.  Then team up with your Realtor to find similar homes in the area, community and location you prefer.  Have an open and honest conversation that is specific as possible with your agent about what you are looking for outside of the house itself.

Too often we put the cart before the horse when talking about the house, when the truth is that the area and community are as, if not more important, than the house.  Picture this, you find the home of your dreams and move in.  Each night you drive home from work and pass some thugs on the street corner doing God knows what.  As you pull up to your dream house, the neighbors have a few dozen friends over to rebuild their cars in the front yard.  Meanwhile, the neighbors on the other side’s son and his “band” start practicing each night around 10:00, just as you are trying to get your kids to sleep.  Is that dream home of yours really a dream or is it quickly becoming a nightmare?

Would you rather live in a nicer community with enforced deed restrictions?  Would you sacrifice some of the perfection of the home for that?  That is the limitation of the internet when it comes to choosing a home.  Unless you are extremely familiar with the community and area, you really don’t have anything to rely on other than your agent to make sure that your time, money and investment are protected.

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5 Things to Know About Appraisals

May 22, 2012 By Leave a Comment

Houston Real EstateHaving a solid understanding of the appraisal process can help you get a fair deal when selling or refinancing your home.

Though all appraisers are bound to act in accordance with the Uniform Standards of Professional Appraisal Practice, or USPAP, appraisal is not an exact science. Appraisers use their skills and knowledge to give their best opinion of how the value of your home compares with similar homes in the neighborhood. Here are some things that you should know about how this process works:

1.       Appraisals are unbiased. Whether it was you or your lender who ordered the appraisal, the process results in an impartial opinion of the value of your home. An appraiser uses a home inspection, property information, and market research to determine an accurate value for the home for a specific time period. The appraiser will not factor in any personal issues that you may have or any reasons that you may need to sell right away.

2.       Home values can change quickly. An appraisal is merely a snapshot of your home’s value at a certain date. If you decide to sell your home three months after an appraisal has been completed, the market price may be higher or lower depending on how things have changed, and you will likely have to have your home re-appraised. If you know that you will need an appraisal at a future date, you can ask for something called a prospective appraisal. Let your appraiser know that this is your intention.

3.       Appraisals can be used for different purposes. Appraisals being used to figure out your home’s market value will likely result in a number that is slightly different from appraisals being used to determine your property taxes. An appraisal for insurance purposes, for instance, usually determines the cost of what it would take to rebuild your home from the ground up rather than what the market price is.
If you ordered the appraisal, make sure the appraiser knows for what purpose you ordered it and what your interest in the property is. If your lender ordered the appraisal, ask what criteria were used to make the final determination of value.

4.       Appraisals rely on accurate information. Don’t try to withhold information from an appraiser or misrepresent the facts. Your appraiser needs accurate information to give you a fair value, so if you are asked to provide a property tax bill or other information, do so. Not giving this information may delay the appraisal process and may result in an appraisal that you are not pleased with.

5.       You can ask for a second opinion. If you feel as if your home appraisal is inaccurate, you can ask another appraiser for a second opinion. Be aware that you will need to pay for this second appraisal yourself, but in many instances it may be a small price to pay in order to sell your home at its true market value.

What have been your experiences with home appraisals? What are your tips for getting an accurate value?

This is a guest post from Amy Burweigh, who works in marketing and real estate at Aim Your Way.  Aim has provided a variety of property maintenance and preservation services as well as inspections for over 20 years and can be found at www.aimyourway.com.  Connect with Amy on Google+.

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Using Storage When Moving

April 27, 2012 By 1 Comment

This is a guest post from Joseph Ver at www.sparefoot.com. SpareFoot helps you find the right self-storage center for your needs.  Click here for more info.

Houston Real EstateWith a stack of about fifty sheets of papers that I had to read for an upcoming project, I decided to watch some television as I faced this daunting task. As I flipped through various channels (Guy Fieri eating food, a group of people designing a house, a bad reality show on “music television”) I finally settled with another fairly bad reality show: Storage Wars. Now I say that somewhat facetiously as I can allow myself to indulge in a little “bad” reality television. Plus, Storage Wars is a thirty minute show that requires no commitment to actually watching it. I could passively watch it while I underlined and took notes on the population policies in China. But while I was watching the show, I couldn’t help but think about the different reasons why people have things in storage. Why were these items that they are auctioning off in these units in the first place? People use storage for various reasons and don’t really think about it until they need it. When putting your home on the market, here are some ways you can use storage when you need it.

Relocating in the same city. Not every person moves due to job related circumstances that forces them to relocate to another city. Some people just want a bigger home. When you plan on relocating in the same city, try renting out a storage unit to cut down on the stress. Slowly ease into your new home instead of moving in all at once. Bring in a few items throughout a time period (a few days, weeks, or a month) and store things that aren’t absolutely necessary in a storage unit. I equate this to buying a new fish. Before you place your fish inside the tank, you want it to get used to the water temperature first, so you place the bag that the fish is in the water for thirty minutes to allow the fish to acclimate to the temperature. By slowly moving in, transitioning will go a lot more smoothly for yourself and your family.

Staging your home. Before you move, you might need to sell your home first. Many people talk about the necessity of home staging. (Editor’s note: you can view my series on staging by clicking here.)   The process can sound daunting, but depending on the condition of your house, it can be as simple as making sure the grass is clipped, to very complex as flipping your rooms upside down. You can always get a professional to help stage your home, but if you lack the funds, here are a few tips to take in consideration. Make sure that your house is decluttered. When someone comes in to view your home, they are imagining themselves in that new living space. Sure they’re not going to have your furniture, but if a bedroom looks cramped due to a bulky treadmill, then they’re going to think that room is cramped. Open up your space and think about placing things, like that treadmill, in a storage unit. You may have an antique lamp that has been handed down from your family, but if it causes a room to look off, stow it away. The most important thing in staging your home is putting yourself in the shoes of the buyer. Throw trash away, make your beds, and keep the sink clear.

Selling your home and finding a new one can be a very stressful process. If you find small simple ways to make things a little easier, they will add up and make the experience less stressful. Think about using a storage unit. Not in the market? There are still ways to use storage that are relevant to this information. Now excuse me, as I watch another episode of Storage Wars.

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Why Sign A Buyer’s Representation Agreement?

March 8, 2012 By Leave a Comment
BRA

Houston Real EstateI have gotten to the point now where I just won’t show homes to a buyer without them signing a Buyer’s Representation Agreement.  When I explain this to people, I often hit an objection that sounds something like, “Well I am not going to sign anything that locks me into something!”  I totally understand.  The problem, of course, is that someone likely told them to beware of those tricky Realtors, or they had a bad experience with someone else in the past, or they are just uneducated about the Agreement.  More often than not, it is the latter.  So, in this post, I hope to educate about the Agreement, convince you that signing a Buyer’s Rep protects you, and show you how you will get better service by signing one.

The Buyer’s Representation Agreement

Many people believe that the Buyer’s Representation Agreement is an all-encompassing document that forces them to use a particular Realtor for the rest of their lives.  Ok, so that’s a little dramatic, but it tends to be pretty close to the truth.  So, let’s break down the agreement and show how easily it can be customized to serve you better.

In essence, the Buyer’s Representation Agreement is a simple form that says Buyer will be represented by Broker for the purchase or lease of real estate.  It lays out compensation guidelines, areas, dates, and a bunch of other legalese.  The part to pay attention to is that you, as the purchaser, can limit the scope of the agreement to an exact property or a certain date, or both.  So, you aren’t locking anything in forever.  For instance, let’s say you are out driving and see a home that you want to look at.  You call an agent and set an appointment.  When signing the agreement, you can make it show that it is only for that home and only for that day.  Easy as that.

Now, here’s why you should do that…

Customer vs. Client

I am going to say this several times throughout this post, but the main reason to sign a Buyer’s Rep is that it makes you the agent’s client.  If you don’t sign one, you are just a customer.  What’s the difference, you ask?  Everything!

As a customer, the agent has no fiduciary duty to you.  As a client, they do.  As a client, the agent is required to operate, negotiate, disclose and otherwise work on your behalf.  As a customer, especially if they are showing their own listing, they owe that fiduciary duty to the Seller.

Benefits of Signing The Buyer’s Representation Agreement

Obviously, the fiduciary duty is the big one!  Really, when you break it down, that should be the only one, but there are others.

1) You get the full attention, care, accountability, and disclosure of an agent because they know they are dealing with a client.

2) You get your best interests serviced at all times during search, negotiation, closing and beyond.

3) You get a better idea of the scope of services the broker/agent owes you as a client.

4) There is a greater peace of mind that you have an expert on your side making sure that your needs are going to be met.

5) Your overall level of satisfaction with the home buying process will be increased because you will have little or no doubt that you made the right decision and got the best deal.

 

So that’s not scary, right?  It actually works in your benefit and makes for a better home buying experience.  So, forget what you’ve heard, take a look at the Buyer’s Representation Agreement, set it up so it best serves you, and get the protection and service you deserve.  All that from two pieces of paper!

 

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I am an Accredited Buyer’s Representative

March 1, 2012 By Leave a Comment
ABR Logo

Houston Real EstateToday I was awarded the Accredited Buyer’s Representative (ABR) designation by the National Association of Realtors and the Real Estate Buyer’s Agent Council.  The ABR designation is the benchmark of excellence in buyer representation.  Realtors who have earned the ABR designation provide their clients with the highest level of expertise and service when it comes to buying a home.
Why would you trust your home purchase with someone who is not at the top of their field?  Call me today to experience the difference that an Accredited Buyer’s Representative can make.

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Foreclosures Are Not For Everyone

February 20, 2012 By 4 Comments
Foreclosures Are Not For Everyone

Houston Real EstateIf you’re a home buyer today, it is tough to ignore the idea of buying a foreclosure.  I mean, the news is filled with stories, the pricing is amazing, and the money on the back end when you sell is pretty tough to walk away from.  Why wouldn’t you want to buy one?  Well, I believe that there are several reasons why, and as is so often the case, a lot of it depends on you.  There are also some other things to consider and this post will hopefully open our eyes to some of the things that might make you think twice about buying a foreclosure.

Disclaimer: I work with a lot of foreclosures and people buying them.  This is, by no means, intended to talk you out of buying a foreclosure.  Instead, my hope is that you will have the entire picture so you are able to make an educated decision.  This post is intended for people who are buying and intend to live in the home, not investors.  In this market, investors would be crazy not to buy foreclosures.

 

Why It’s All About You

Just like deciding how many bedrooms and bathrooms you want in your new home, making the decision about whether or not to purchase a foreclosure can be made very simple by asking some simple questions:

Do you have the cash? – Simply put, rehabbing a home costs money.  In many cases it can cost a lot of money.  Right now, the only loan program out thereHouston Real Estate for people who want to buy a home and fix it up is the FHA 203(k).  Otherwise, you can get a loan for the house but will have to come out of pocket for the fix-up cost.  Before you say to yourself, “I know but I can fix it up over time.”, think about that and your current financial situation.  Do you live paycheck to paycheck?  If so, where is the money going to come from?  I can tell you from experience that the average investor rehab (keep in mind that investors don’t fix things up the way they would if they were living in the home) is between $15,000 and $20,000 in the Houston market.

Do you have the time? – If you have the money, do you have the time?  Rehabbing a home, even if you aren’t doing the work yourself, is a laborious process.  If Houston Real Estateyou travel a lot or work long hours or can’t be reached during the day, you are going to have a very difficult time managing the process.  Even if you have a good contractor, it isn’t going to be easy.  What will happen when your contractor goes missing and you are at work?  Or, they have a question that needs to be answered right then and they can’t reach you?  What if you don’t get out to the home for a few days and realize things have been done wrong?  See where I am going with all of this?

Do you have the plan? – If you’re going to do this, know what you are going to do.  Making changes on the fly is not only time-consuming, but usually will cost you more money as well.  Know what you are going to do, what colors, what paint, what flooring, etc. before you start.

Houston Real EstateDo you have the know-how? – This is a very serious question.  It’s ok if the answer is no.  If the answer is no, the question becomes do you know enough to know whether or not the person you are going to hire has the know-how.  If not, don’t buy a foreclosure.  You and your family, if you have one, will be living in this home.  As such, you want to know that it is safe, sound, and not going to pose a risk to you or your loved ones.

What is your risk tolerance? -  This is a risky proposition.  You are going to buy a home as-is, where-is.  There is no warranty, no disclosures, no nada.  Are you willing to accept that risk?

Other considerations – Where will you live during the rehab?  If in the home, are you ready for that?  What is your time frame?  Are you going to overbuild for the community you are buying in?  Are you willing/able to stay in the home long enough for it to pay off?  Has all of this scared you?

 

Why It Isn’t All About You

Is the home where you want to live? – This all depends on your local market, but in many cases, foreclosures tend to be in areas where you might not want to live.  Do you want to live in a place you normally wouldn’t just because you got a deal?  Will you and your family be safe?

Is your time and money well-spent? -  Do you really want to make this kind of time and money investment in an area that has a lot of foreclosures?  Are you going to sink a bunch of money into making a beautiful home for you and your family only to have the homes around you rehabbed by investors and filled with renters?  That is not good for your resale value, undermining the entire reason that you bought a foreclosure!

Houston Real EstateDo you have a crystal ball? – Obviously the answer to this one is no.  None of us do.  The future of your market area is a consideration though.  Let me give you a real life example to help explain this one.  I have a client who has been looking for a foreclosure.  He is a single guy, first-time buyer, but works for a home builder and knows what he is doing.  We have looked at several homes only to walk away from them because of the community.  We decided that he was not willing to buy in a community that wasn’t complete, a community that had several foreclosures, or a community that wasn’t either part of or very close to one of the larger, master-planned communities in the area.  His thinking is that if a community has either a bunch of foreclosures or is incomplete, there is too much risk involved.  What happens if the homes around his become rentals or if a sub-par builder finishes out the community?  He is not willing to take that chance.  Instead, we are on the lookout for homes that are in safer areas from an investment standpoint.

 

Again, this is not intended to talk you out of buying a foreclosure.  They are great investment tools, whether you are going to live there or rent it out.  However, if you can’t honestly answer the questions above with some level of certainty, maybe you should look somewhere else.  There are plenty of homes out there that make a safer, easier decision that are still priced very well.  In fact, for an end-user, there hasn’t been buying conditions like this in a very long time when you combine pricing and interest rates.  In the end, it all comes down to you.  So, skip the flash of the rehb shows on TV and really sit down and consider your decision thoughtfully.  You will not regret it, even if you don’t change your mind.

 

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Real Estate Auctions 101

January 31, 2012 By 2 Comments
Home-Auction

Are you, as a real estate investor, interested in real estate auctions as a way to increase your portfolio at an even further discount?  If so, this post is for you.  Having just finished my first Houston Real Estatelarge scale auction, over 150 REO properties, I wanted to share both my experience and some tips for making the most of yours.  In this post, I will discuss the process, some warnings to consider, and some tips to maximize your return on investment of not only money, but time.

Disclaimer: As an agent, this is not a review of the auctions held by taxing authorities as there is no place for agents in those.  If you are looking for information on the auctions that occur monthly on the courthouse steps, this post has nothing to do with that.

There are several auction companies out there that help lenders and banks dispose of their REO properties.  The easiest to find is www.auction.com, which clears properties for a number of large servicers like the VA and Bank of America, amongst others.  Other companies that hold auctions for lenders and banks are Kennedy Wilson, Williams and Williams, Hudson and Marshall, and a growing number of others.  You can do a quick Google search and sign up for all of their email lists.

If you get nothing else from this post, please take this away with you: Go!  If you are interested, go to one.  You don’t have to buy.  You don’t have to take your checkbook.  Just register and go to the next one that is close to you.

PROCESS

Generally speaking, these auctions include listings from more than one bank or lender.  Whether they have an ongoing contract with an auction company to take their expired REO listings, or they are being encouraged by the FDIC, or they just need to clear some room and want to do so as quickly as possible, banks will contract with these companies to market the auction, coordinate and hold the auction, and coordinate all of the paperwork from contract to closing.  Sometimes the auction will use local agents that the banks work with to help them.

More often than not, you will first hear of the auction from a local radio or newspaper ad.  These companies spend a lot of money to market the auctions.  They will encourage you to call for a brochure (a.k.a. email capture for them) or go to a website to see the list of properties being auctioned.

More often than not, there is a preview period prior to the auction that will include at least one, but usualy several, open houses.  Depending on the auction company and the arrangement with the lender, you might be able to bid during that time.  We’ll get more into that later in the post.  If it is an online-only auction, this might vary somewhat.

On auction day, there will likely be a lot of investors there to bid.  The auction will likely start late, unless it is online-only.  Bidding is fast-paced and hectic so preparation is key (again, we will get more into that shortly).  The properties will move fast and once bidding on a property is complete, the high bidder will be escorted to another room to work on contract paperwork.  If you are going to bid on multiple properties, it is important to make people aware of that or you will run the risk of missing your next bidding opportunity while you are in the closing room.

Last, but not least, just because you are the high bidder does not mean that you got the property.  More to follow on that as well.

WARNINGS

There are several things you should be aware of prior to bidding at an auction:

  • Do like the Boy Scouts and “Be Prepared”.  That means reading all of the fine print, visiting the homes and estimating your rehab, be pre-aproved and/or have your cash readily accessible, bring checks for earnest money, and reading ALL of the fine print, again!
  • These properties are in an auction for a reason.  More often than not, they have been on the market before and did not sell.  It is a rare find that you get something at auction that is in great shape.
  • Auctions aren’t always the best deals.  Everyone hears auction and they think that they are going to make out like a bandit.  While this certainly happens, it is not always the case.  That is why it is very important to be prepared, know the property, and don’t get caught up in the “auction fever” and bid too much.
  • Watch for “Buyer’s Premiums”.  These are fees added to the sales price to offset the cost of the auction.  You will have to pay it, so make sure it is factored into your bid.

TIPS FOR SUCCESS

Here are my tips for a successful auction experience:

  • If you are a first-timer and nervous about it, go to one with no plans on purchasing.  Take it all in and then you will be ready for the next one.
  • If there is an early bid process, take advantage of it only if you can actually complete the sale before the auction.  If they are just taking bids to run things up for auction day, pass on the early option.  I can tell you from experience that the reserves set by the banks does not change between the preview and auction day.  While they might take a lower than reserve bid on auction day, they would probably take it before auction too.  So, if there is a property you really want and you can bid before auction day and complete the sale so the property never makes it to the auction floor, do it.
  • If you have a Realtor, use them.  That is what they are there for.  They can almost always register as your agent and get paid.  It doesn’t cost you bargaining power in the auction because the cost is built in and the auction company gets it if your agent doesn’t.
  • In case you missed it in the warnings section, read the fine print.  Seriously.
  • Get there early.  Get in, get settled, meet the other investors, agents, and bankers.  You can actually learn alot, expand your resources and contacts, and get more out of that than you do in the auction.  Also, you want to get a lay of the land, make sure they know you might be making multiple offers, etc.
  • The second most important thing you want to know is this: It ain’t over ’til it’s over.  Just because the auction is over, it doesn’t mean that you didn’t get the property.  The auction companies typically have a post-auction period in their contract to go back to bidders if a deal falls through or to negotiate an offer.  So, if you were a little lower than the bank wanted, they might counter and work with you on making a deal.  We had several properties that sold in the weeks after the auction that were turned down on auction day.

In conclusion, if you are prepared, informed, have your agent, and don’t get caught up in the auction process, you can find some great deals at real estate auctions.  You can also make some terrible mistakes and lose money if you aren’t prepared and informed.  Don’t be afraid of the auction process.  It is actually a lot of fun if you make the most of it.

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