Auctions

Attending a real estate auction can be an exhilarating experience, and might land you a piece of property at a cheaper cost. Two types of auctions are available for real estate: public and private.

• Public Auctions: Properties sold through a public auction have typically been obtained through a court-ordered foreclosure. These properties often have no debt attached to them, but may have liens against the title, which may make it difficult to obtain financing or insurance.
  
  Public auctions are often conducted by a Cook County Sheriff, and are advertised in area newspapers, at the Cook County Clerk's Office or the Cook County Circuit Court. Foreclosures are discussed in more detail later in this chapter.

• Private Auctions: In contrast to public auctions, properties for sale at private auctions are not there by court order. These properties may not have already been foreclosed, but the owner may be in default of the mortgage, which means the property is about to be foreclosed. This can be problematic, as you inherit any additional debts tied to the deed and title, as well as other claims when you purchase the property.
  
  Private auctions are advertised in area newspapers and on the Internet. Sites such as www.policeauctions.com or www.GovernmentAuctions.org, as well as foreclosure listing Websites, provide information on when and where auctions occur. Some sites may require a fee for access to the database of properties or auction locations.
  
  Properties sold at private auction might not be as good of a deal as those from other purchasing methods. Many sellers require a minimum bid (floor bid) to cover their debts and auction fees that may already be at or near  the property's market value. Add to this the frenzied environment of an auction, and you may find yourself paying more for a property than it is worth.

When purchasing through an auction (public or private), you are usually required to present an initial payment of around 10% of the bid at the time of the auction. These down payments can be made in cash, certified check, money order or other certified funds. The remaining balance is usually due within a set period of days (usually 30) of the auction. This window gives you time to secure financing for the space.

Failure to pay the remaining balance in the allotted time puts your bid at risk of defaulting, which usually results in you forfeiting your initial down payment. In addition, the property can be put up for auction again. As the requirements for each auction house are different it is vital that you take the time and review the policies and procedures before participating in an auction.

Be forewarned that property bought through this method may not have clear title (especially a private auction property) and you may have other legal red tape to clear up before you can take possession. You will need to check with the auction house to find out if can check the financial and legal strings tied to a property prior to bidding. Properties sold through an auction are often sold as-is. Meaning, the owner will not make any repairs to the property before you take ownership. For this reason, it is a good idea to have the space inspected beforehand.

In most cases, you will not be reimbursed nor allowed to renegotiate your offer. However, an inspection can help you to assess how much investment you will need to make in the property to make it habitable, and will inform your biding process. You can also explore making your purchase offer contingent on the results of the inspection, so that if repair requirements are not acceptable or exceed your budget, you do not have to purchase the property. For more information on building inspections, see Chapter 18: Inspections.

To find when an auction will occur, contact the above-mentioned government agencies, as well as local auction houses listed in the telephone directory.