What Do I Need to Prepare Before Bidding on an Auction Property?

Great question! It’s definitely helpful to have your ducks in a row before you bid on a property.  In this article we will cover:   

• Buying strategy  
• Research to do before you bid  
• Documents to have ready   

There’s a lot to consider before you decide to bid on an auction property like what you’ll do with it after you buy it, whether you’ll pay cash or finance the purchase, and what to do if the property is currently occupied. To get you started, we created a downloadable checklist of some of the things you should be thinking about before you register and bid on a property. Take a look at the list below! This list is obviously not comprehensive, but it does give you a head start about the things to consider before putting your money in the game.   

Pre-Bid Checklist   

Example  

Things to consider for your buying strategy

Because there’s so much to think about, we wanted to call out a few things on the checklist that are sometimes overlooked by first-time buyers. We’ve found that it’s really helpful to have a plan in place with these decisions already made before participating in an auction event.     

• Owning strategy – Determine what you will do with the property if you are the winning bidder, whether it’s a fix and flip, a rental, or a wholesale (that is, purchasing the property for a specific amount, and then immediately selling it to someone else for more money).   
• Funding – Are you planning to pay cash, get a hard money loan, or secure traditional mortgage financing? Think through how you will pay for the property ahead of time.  
• Best and final offer – Decide the highest price you’re willing to bid on a property.    
• Closing costs – Read the fine print on a property’s page to confirm what your estimated closing costs will be and what’s included, from auction fees like a buyer’s premium (5% of the winning bid amount or $2,500, whichever is greater), to your earnest money deposit (3% of the total purchase price or a minimum of $3,000), to any liens you might be responsible for paying off.    
• Vesting – Will the property be listed in your name or the name of an entity (like an LLC)? If it’s your name, XX. If it’s an entity, make sure you have all the paperwork ready like the operating agreement and proof of funds.   
• Total purchase price – Estimate your total purchase price, so you’ll know more or less the amount you’ll be paying at closing. The total purchase price is usually the winning bid amount plus the buyer’s premium, if applicable.   
• Occupancy – First, check the property’s page to figure out if it is occupied. Second, if it is occupied, look up the rules for how to handle occupancy in the city/state where the property is located.   

 Make sure you do the proper research ahead of time  

• Due diligence – Check out our checklist about conducting due diligence. We highly recommend doing your research before bidding on a property. This very important step may include looking up the estimated value, reviewing title reports, estimating any repair costs, and visiting the property and surrounding neighborhood (when possible).   

Have your documents ready for if and when you win the property  

• Financing:   

• Cash: If you’re paying cash, you will need proof funds. This could the last 60 days of your bank statements, xyz…. Need to fill in the rest  
• Mortgage: A pre-qualification or pre-approval letter will need to be uploaded to your auction dashboard once you win the property. Don’t have one yet? Learn about getting a mortgage here.    

Takeaway   

We know this process can be a bit overwhelming, but don’t worry! The most important thing to remember is to enjoy the process. Research Look up what you can and have your buying strategy in place register before the auction event begins, bid on the property, and see what happens. You could be the next winning bidder!