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Real Estate Auctions: 5 Hot Financing Tips for Getting Your Deal!

August 1, 2011

The amount of homes going up for auction is at an all time high. So, how do you go to an auction and get a dream deal? Here are 5 tips to make sure you get it right.

1. Get Financed BEFORE the Auction. Most auctions have no financing contingencies, meaning that you should be prepared before you head there or you could lose your bid deposit. Refunds are almost never given due to a lack of financing.

2. Be Pre-Approved, NOT Pre-Qualified. This requires more information and more work, but if you have all your ducks in a row, it will make purchasing the home at auction much much easier.

3. Request the most you are willing to spend on a property, and then some. Make sure you calculate what the home is worth, what you can afford, and add in any and all closing costs, as well as a “Buyer’s Premium”. This can be 5-10 percent of the cost and goes directly to the auction company. You can find out what it is simply by calling them. After you have a final total, make sure you use that when applying for financing.

4. Earnest Money. This is usually predetermined at auctions, and only cash, certified check or cashier’s checks are taken. Typically you have 3 days to fund the earnest money to a full 10% of the purchase price. Online auctions can be different in terms of using credit cards, which will be charged for authentification purposes.

5. Closings are within 30-45 days. Most of the time. This is what makes secured financing so essential. What draws people to auctions is the quick pace, so ensuring that you can afford the house is key, otherwise you may lose the earnest money already paid.

All in all, there is no room for error or glitches when going through auctions. If you expect one, don’t act. Make sure you have a back-up plan, and most of all, make sure you have financing in place and ready to go or you could end up a very unhappy camper.

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