Property Auction Rules
Property auctions may be a great way to find a home or piece of property at a very low price. However, property auctions are only for people who have done their homework and are aware of all the risks. Part of the homework is learning the property auction rules prior to the auction date. Although rules vary, there are several uniform rules to be aware of.
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Registration
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All bidders must register prior to the auction. To register, you present two forms of ID. Auctions that require advanced registration require a bid paddle and number before you can bid at auction. Arriving on or before the registration time ends is also important.
Types of Auctions
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Know the type of auction before bidding. There are three basic types: minimum bid, reserve and absolute auctions. Each differs in the bid pricing. Minimum bid auctions start at an established price, usually the amount of taxes and fees owed to the agency holding the auction. The winner is the person bidding the minimum price or above. Reserve auctions have a set, undisclosed price that the seller wants. He has the right to accept or reject the winning bid following the auction. Absolute auctions usually have no minimum. The winner is the highest bidder.
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As-Is Rule
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In all property auctions, access to the property is limited. You do not have the option of hiring an inspector to point out the hidden issues. Oftentimes, potential owners aren't allowed to view the site before the auction. Once the property is won at auction, however, it is not returnable. It isn't uncommon to find foundation flaws, sewage issues or any number of expensive problems that uninhabited properties are known for. No matter what problem is found, it is not grounds for a refund. You buy the property as is.
Proof of Funding
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Read the rules of your auction to find out about the deposit. All auctions have a percentage or specific dollar amount that is required of the auction's winner. Some auctions require that you show proof of a home loan or cash to cover the total price of the property. You may be asked to show proof of funds when registering for the auction. The purpose of these deposits and proofs is to ensure that the winning bidder can actually afford the property once it is won.
Final Sale
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No sale is final until the auction officials or those from the government agency presiding over the auction authorize the sale. Thus, being the winning bidder does not guarantee ownership of the home. Winning bidders can also lose the property if the sale isn't completed within a certain amount of time. In addition, some states allow the previous owner (under certain conditions) to reclaim the home.
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