Auction Homework
Going to an auction - What to do: Your Auction Homework
This is the time for due diligence for you and your client. Remember, while many auctions may have contingencies for the buyer to be released, most do not -- the buyer is at risk -- $$ can be forfeited.
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Have a plan of action - examine your alternate course of action and their consequences. Come up with your best plan.
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Decide what your goal is for this property -- hold, live, rent, renovate, convert, alt, reuse, demolish, etc. Your use for this property ties in directly to your plan and your budget.
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Do a thorough neighborhood analysis -- area, location, condition of other properties, competition, trends, etc. Act like an appraiser. Visit at various times of the day. Look at everything you possibly can.
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Learn as much as possible about the real estate, broker, tenant, banker, mailman, appraiser, utilities, delivery people, insurance agent, police, fire. Anyone or place that makes sense.
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Do legal research -- Indebtedness. Ask mortgage company, or seller for information on taxes, insurance, surety, lot size, zone, access, utilities, liens, comp plan, etc.
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Obtain an appraisal or CMA and a property inspection. Know value now, 6 months, (market time), possible, uses (HBU), flaws, potential problems. (Hint: interior usually mirrors exterior.)
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Have a title search done (lawyer) -- liens, encumbrances, taxes, flood zone, violations, IRS. If necessary, request environmental audit.
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Make out a budget. How much do you want to spend? How much risk and profit do you expect in relation to your goal: purchase price, hard costs, soft costs, closing and escrow fees, marketing expenses, etc.
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Get prequalified for financing. Usually deposits are non-refundable. You may obtain better terms. Make sure that you can close the deal.
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Prepare your strategy. Review your plan and your goal. Know what you are going to do, when you are going to do it, why you are doing it, and how much you will bid.
*Note: The courts and law offices are full of buyers who did not plan ahead.
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