You’re looking for the deal of the century. Rumor has it you can find that deal at an auction. Or can you?

You’ll find some fantastic deals when buying auctioned houses. You’ll also discover your share of money pits and other disasters disguised as deals.

Take a minute and read 4 tips you should know before placing a bid on a house at an auction.

How Many Risks Are You Willing to Take?

Before you place your first bid, educate yourself on the risks of buying foreclosures and other distressed properties.

First, you risk buying a home that looks fine from the street, but once you’re inside, it’s a disaster. In most cases, you won’t even see the inside until you get the keys, especially if a tenant is occupying the property.

Second, there’s a risk of grabbing what seems like a great deal only to find out you overpaid. When you pay too much at auction, you might end up losing money that you’ll never recoup.

Determine before you bid how much risk you’re willing to take.

Know the Market

Another way you can reduce risk is to study the market. The real estate market fluctuates constantly, and it’s up to you to develop a keen awareness of the current market for properties similar to the one you want to buy.

Research how long homes stay on the market. Review price trends to gauge whether property values are increasing or going down.

Knowing the market helps you figure out what you should bid. It also prevents you from investing in risky properties.

Research the Property

Do your due diligence on a property before you place a bid.  Start with the following information:

• Estimated Market Value
• Money Owed on the Property
• Permits Pulled for Previous Work

Hire an attorney to do a title search. You don’t want to buy a home with liens, unpaid real estate taxes, or other claims on it. 

Don’t Settle for a Drive-By Inspection

Ever heard the old saying about not judging a book by its cover? When buying auctioned houses, in many cases, the cover is all you’ll see.

Even so, you should still take advantage of information posted by the auction company. They provide extensive details about properties about 30-45 days before the auction takes place. They usually hold open houses as well.

If possible, schedule a private visit and consider a building inspection. If you’re financing the home, your lender may require one.

Interested in Buying Auctioned Houses?

Understanding risk, the market, and the property you want to buy will prevent you from taking too big a risk. Scheduling an inspection can save you from buying a home with too many significant issues.

We hope you’ve enjoyed reading our post about buying auctioned houses and feel more prepared to bid. If you’re interested in learning more about buying homes and caring for them, we invite you to continue reading our blog.