Oh, the woe! It seemed so easy, bidding online, perhaps watching the television auctions of properties in a state hundreds of miles away…

Here are five rookie mistakes and some of the real-life consequences that resulted for real buyers”

• Not checking the title and lien position prior to bidding.
  • Didn’t know they were bidding on the second lien position and thus still being responsible for the loan/lien in first position.

• Not checking if there are any other liens on the property.
  • Didn’t know which lienholder was foreclosing
  • Didn’t know how that affected the the lien in which you are bidding on

• Not checking the property taxes and what are due prior to bidding.
  • Property taxes are ALWAYS in first position and are the priority. Not checking if there are any delinquent property taxes could turn a good deal into a bad deal quickly.

• Not driving to the property and physically inspectingas much of it as possible.
  • Didn’t know the city had condemned the house as structurally unsafe,that a portion of the house was already demolished by the cityprior to the auction, that the rest of the house came down the day after the auction,or that the owner was liable for the costs of the demolition.
  • Didn’t discover people living in the houseor know that the new owner was now a landlord entangled in a squatter’s legal rights situation
  • Didn’t know that the property was being used to manufacture methamphetamine

• Not knowing the rules of bidding prior to showing up.
  • Came unprepared with a cashier’s check not made correctly or for the correct amount
  • If bidding in a state where only a portion of the funds were required to bid, you didn’t have cash or a hard money lender already in place to pay for the property in full the next day
  • Unaware that a last minute bankruptcy by the owner would negate the sale and you would have to give the property back
  • In states with a redemption period, not knowing that even though you are the successful bidder that the homeowner can still “redeem” the property with a certain amount of days after the auction if the “pay in full”

Rookie mistakes in real estate auction buying can have a learning cost of tens of thousands of dollars. This is a game for pros. Lenders and trustee’swill not fix a newbie buyer’s problems after the sale is concluded.

If you are new to auction buying, consider bidding services that provide pre-auction services such as title searches and even property inspections, as well as intelligent bidding. And may you never know how much these services saved you!

What was your experience when you attended a real estate auction to observe? Have you bid in an auction?

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