Real Estate Auctions
- Adam Garrett
- Oct 25, 2023
- 9 min read
Updated: Jun 9
In this article I'll be going through information including the following:
Unique Elements of Auctions
Auction Tips
Sites to check for auctions
Example
1. Unique Elements of Auctions:
Cash Only More Often Than Typical Properties
Look out for financing information. Sometimes properties will be cash only or require no appraisal if financed. Some loans can happen without an appraisal, but typically you will need at least 20% down, with higher amounts decreasing the likelihood of an appraisal required, but it depends on the lender as well.
Reserves
Watch out for reserves, which are an amount that is above the starting bid that is the minimum that the seller will accept. Ebay & other auction sites have these sometimes as well. I once had a buyer who was frustrated that he had the highest bid on a home but did not actually win the auction due to the reserve not being met. In some cases, an auction will have a policy that eliminates reserves.
Buyer Premiums
Sometimes a home will have a buyer’s premium. This is an amount that needs to be paid on top of the sales price. This amount in some cases is 10%.
High Earnest Money Deposits
Typically there is a deposit amount, similar to an earnest money deposit, and 10% of the sales price minimum is not uncommon for this amount with auctions.
No Showings, Inspections, or Appraisals Allowed More Often Than Typical Properties
More often than with typical properties available, there will be no showings, inspections, or appraisals allowed prior to closing.
Low % on Local MLS vs Typical Listings
Typically, the vast majority of agent listings are listed on the local Multiple Listing Service (MLS). With auctions, in some markets it can be the opposite, where it's the minority, not the majority, that are listed on the local MLS. That hurts the sellers, but in doing so helps the buyers looking to get a deal.
In a search I ran in the Richmond market on their primary MLS and an adjacent MLS based out of Hartfield, none of them were listed on the primary MLS of the area, even though some were listed on another non-local MLS representing a low % of MLS coverage in the area, demonstrating the lack of seller education on the importance of being on the right MLS:
Image courtesy Zillow
2. Auction Tips:
Don't Casually Browse
Generally speaking, as with other buyers' searches, it's best to always set up searches for auctions on various websites with emails once properties in your criteria become available rather than casually browsing from time to time. You'll be much more efficient that way and have much better chances of seeing properties available before they're sold.
Related:
Don't Rely Exclusively on Agent Searches
Unlike a traditional purchase, where setting up searches outside of your agent's search(es) on MLS should yield the vast majority of results, in most cases relying exclusively on your agent for the search element for auctions is a bad idea.
Use an Honest & Knowledgeable Buyer's Agent
The vast majority of buyers would best be served by an agent for a wide variety of other elements of the home-buying process in addition to the main search. The agent you pick should be an agent that is both knowledgeable & honest about pointing out negatives with potential properties, which will reduce the prospect of buyer's remorse. For someone looking at homes from an investment standpoint, that's even more important than with a typical buyer, where feelings and emotions are more significant aspects of the home-buying process.
Related:
2. Why Buyers & Sellers Often Choose Not to Work with Honest Real Estate Agents & How To Avoid That
Use an Agent w/ Great Gadgets for Visually Seeing Properties
Due to the volume of properties that aren't available to be shown &/or inspected that are being auctioned, it's best to use an agent with plenty of tools/gadgets if you'd consider auctions where that's the case.
For instance, as shared on "Homes for Sale with No Showings Allowed" in the gadgets section,
"1. I have a drone (DJI Mavic Air 2 as of 10/25/23). Even if the backyard can’t be seen from the road, my drone can in some cases make it visible.
2. I also have a 30' telescopic pole that I can put my camera phone (the latest Samsung at the time of this writing) at the end of with my Ipad Pro connected to the pole. Sometimes this setup can be superior to a drone for certain angles, in part due to the lack of noise caused and the better options for zoom present on the latest camera phone vs the latest drones when comparing devices of similar prices.
3. Binoculars can be helpful if no interior access is allowed, especially if you'll be coming in person, & I have a few. I have a Bushnell 7-21x40.
4. I have a Pankoo 12x50 monocular w/ a smart phone adapter
5. I have the latest Samsung Ultra 5G, and have purchased the latest Samsung for the past 3 years as of 10/25/23. The latest Samsung's Zoom is typically better than the latest Iphone's Zoom, which is one of the top reasons why I use Samsung Galaxies despite being higher priced typically than the latest Iphone.
6. I have a Flir One Pro thermal camera."
Bad Marketing Means a Better Deal Usually, But More Time
The worse the marketing, the better the deal usually (but not always, i.e. the next section). Sites that only have a little real estate being sold, selling mostly other things of significantly lower value, will usually be better deals also if not advertised in other places like Zillow (Zillow auto-populating from MLS). That said, the worse the marketing, the more time-consuming things will be for buyers.
If No Viewing or Inspections are Allowed, Be Prepared to Take a Significant Financial Hit
Before getting excited about an auctioned property, be sure to check on viewing availability. If no viewing or inspections are allowed, be sure to be prepared to incur a significant financial loss, especially if no pictures are available of the interior of the property. Especially small-time investors may be better served by properties where a home inspection/viewing is possible prior to closing. I've seen records of buyers paying more than triple the likely value of a home where no pictures were available but where I knew the family of the former owner who stated that the property might quite possibly be a tear down due to extensive mold etc. While they considered purchasing it, I told them that it would likely be sold above value due to the marketing not including pictures, & it absolutely was. When no viewing, pictures, or inspections are possible, it's generally better for those who due a high volume of investments who are adequately insulated to take the financial losses with the gains from other properties.
More Details if No Showings Allowed
See my article on the subject here.
Go to the Auction Website
While not unique to auctions (i.e. Hud homes) often the auction has a website to go to listed in the information on the home. It’s best to go there to see the unique dynamics of that property and that auction. Sometimes the list price or current auction amount will be more up to date on the auction website than on MLS or other auction sites.
Save a PDF of the Auction Information
In some cases, an auction’s exclusive online publication will expire prior to the time of the auction. In light of that, it’s best to save a PDF on a site like that (i.e. newspaper ads often).
3. Sites to Check for Auctions:
Zillow.com (17 properties in VB on 10.25.23)
See details in example section below, including narrowing down within Zillow to auctions.
17 Properties in Virginia Beach on 10.25.23, Mostly Not from Agents (so they wouldn't hit MLS)
More National Websites
Zillow.com - 17 Properties in Virginia Beach on 10.25.23, Mostly Not from Agents (so they wouldn't hit MLS)
https://www.auction.com/ - 8 Properties in Virginia Beach on 10.25.23
https://www.bww-law.com/virginia-sales/ 24 Properties in Virginia Beach on 10.25.23 (including active and distant from today for close of auction) - There is limited information on properties beyond address, price, and close of bidding.
Ebay.com 1 Property (tiny house on wheels, not real estate) in Virginia Beach on 10.25.23
https://www.gotoauction.com/sales/advanceSearch 0 Properties in Virginia Beach on 10.25.23
https://www.govdeals.com 0 Properties in Virginia Beach on 10.25.23
https://www.expressauction.com/copy-of-previous-sales 0 Properties in Virginia Beach on 10.25.23
In example contract another agent (Marvin Adams) at my company got, buyer pays buyer's and seller's closing costs. No pulling out or renegotiations after home inspection, no negotiations after contract ratification. Non-refundable large deposit (i.e. $20k for a $400k home). Can’t even have appraisal contingency but Marvin was still able to get a VA loan to work (even with seller required repairs that the seller was willing to do because the seller had a friend who could do them even though the auction house wasn’t required to do anything and it was sold as is - typically the buyer would need to get these done themselves) by finagling some things.
Websites Not National But Include or Exclusively SE VA
Many properties, but very limited information often
https://classifieds.dailypress.com/va/notices/search
Many properties, but very limited information often
City/county websites, i.e. https://www.cityofchesapeake.net/987/Tax-Lien-Sales
1 Property in Virginia Beach on 10.25.23 & 0 total auctions on 10.25.23
https://fredwilsonauction.bidwrangler.com/ui 0 Properties in Virginia Beach on 10.25.23
https://www.motleys.com/realestate 0 Properties in Virginia Beach on 10.25.23 (single family in top section labeled “Residential Real Estate“) For lower section labeled “Real Estate For Sale” skip to next link for map view
https://bid.walkercommercialservices.com/ui 0 Properties in Virginia Beach on 10.25.23 (terribly lackluster filtering options, & w some properties you need to click to even see what state it’s in, but plenty of VA properties, though mostly out of area)
https://www.isgettauction.com/#auctions-start 0 Properties in Virginia Beach on 10.25.23 & 0 total auctions on 10.25.23
My State MLS Members who I saw not listing on the main MLS the last sale I checked on 6/15/24 never landed on the primary MLS of the city/county, with the only one that it might have been on being "My State MLS", that makes up <1% of listings and which is great for buyers. (1, 2, 3, )
Lists of Additional Websites
Auction sites that do NOT have real estate
Ebay.com for the most part (but does have trailers)
Auction sites that have real estate but in areas in VA not including Hampton Roads:
https://www.enlistedauctions.com/ (Western VA including Stuarts Draft, VA)
Zillow Example
Here's an example of an auction search in Suffolk:
For instance, with this property, $109k seems like a good price for >2k sq ft & a Zestimate over $400k, unless it's a "tear down" that would be condemned if the city went in, right?
We see that it's listed on "MyStateMLS" which is a place to put it where many buyers will never see it due to so few properties being listed on there in SE VA & many buyers relying on feeds from agents, with the best feeds being those MLS that have the highest levels of dominance in a given area. While bad news for sellers, that's good news for buyers looking on Zillow because poor marketing yields lower prices.
Don't get your hopes up yet though if you're a buyer. It's important to check the auction site first. For that, I Googled "My State MLS". I've been there before, but it's so rare that properties get listed on there around here that I don't use it regularly with buyers & never use it with sellers. Here's what I found once I went there:
Looks good still, right? Then I went to where it said to "Visit Auction Site".
Here's where I encounter several items of note:
1. The opening bid wasn't roughly $109k, but $304k, and even that amount didn't meet the reserve, and if the property doesn't meet the reserve, they may do another auction or sell it through another means.
2. There's no added buyer premium in this case, which is a slight relief, until they tell you about how the seller is only paying $300 to the buyer's agent as a commission. If a buyer's agent were to only help buyers & sellers for $300 a sale, they'd go broke and be forced out of the business in no time. That means that typically, if purchasing with an agent, you'd be coming up with the difference between $300 and whatever minimum commission they have in your buyer brokerage agreement (typically 2%-3%, with me at 2%, but I've heard from agents charging as high as 4%).
3. This property would require a 5% deposit, meaning if you can't come up with >$15k for an earnest money deposit, you can't buy this house.
4. The options for financing on this property are limited, with cash, hard money, or lines of credit being the only options that the seller will definitely accept. They also state that if they choose to accept more traditional financing, i.e. a mortgage, "access may not be granted for inspection, appraisal, &/or survey." That means that even if you win an auction with a traditional mortgage, which is unlikely, if your mortgage requires an appraisal on-site & in the house, you won't be able to get to closing. Only certain mortgage companies have the ability to not come in for an appraisal, and only when in certain situations, i.e. depending on the house, depending on price, and depending on what percentage down you're including.
I called that number for showing instructions around the same time as this screen shot, with greater than 2 days remaining at the property before the auction was over, just as a test, since the buyer who contacted me about it wasn't considering anything priced around or over $300k. I didn't receive a call back until more than 12 hrs after the auction was over (11:30 AM on Dec 13).
Images courtesy My State MLS & Zillow.
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