Some Addional Things to Know About Auctions

April 23, 2008
If you decide that you are seriously interested in purchasing a property through the auction process, here are a few questions you might want to have answered prior to the actual auction. You may or may not be able to have all of these questions answered.
1. Is there a reserve amount set by the seller?
Some sellers, when they put a property up for auction, set a reserve price.
What this means to a bidder is that even if they have the winning bid they
be able to buy the property because the reserve price was not met and the
seller does not have to go forward with the sale. Be a little suspicious if the
auctioneer will not disclose the reserve price prior to opening the bidding
process. The auctioneer may start the bidding well under this reserve price.
2. Is there a buyer's premium?
It is common practice for auction houses to charge a buyer a "premium" of
5% to 10% of the winning bid. Most often it will be 5%. That translates in a
a winning bid of $200,000 to a fee of $10,000. Something buyers need to
know.

Always make sure that you have done your research on the state of the title and the condition of the property. The last thing that an auction buyer wants is to win a bid which is binding and find that there may be a problem.