Important terms to know:
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Pre-bidding The time period before registering and participating in an auction during which you should conduct due diligence research about a property you are interested in purchasing. |
Before you bid on a property, it’s important to be ready with all the essentials:
- Building a solid buying strategy
- Doing research (aka due diligence) on the properties you’re interested in
- Having your financial documents and payment sources ready to go
To get you started, we've collected a list of the must-consider things you should be thinking about before you register and bid on a property to give you a head start before putting your money in the game.
Pull together the elements of your buying strategy
Because there’s so much to think about before you buy, some things can be easily overlooked by first-time buyers when it’s time to make big decisions. It’s helpful to have a plan in place before participating in an auction so that you can feel confident about getting into the bidding process.
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 even a potential 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 specialty loan, or secure traditional mortgage financing? Think through how you will pay for the property ahead of time.
Best and final bid
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, such as auction fees like a buyer’s premium (e.g., 5% of the winning bid amount or $2,500, whichever is greater), your earnest money deposit (e.g., 3% of the total purchase price or a minimum of $3,000), or 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 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 the approximate 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. If it is occupied, investigate the rules for how to handle occupancy in the city/state where the property is located.
Please note that prior to closing on an occupied property, it is critical that you never disturb the occupant. It may be tempting to visit the property out of curiosity, but it is a criminal offense to trespass!
Make sure you do the proper research ahead of time
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). You may need to contact various real estate professionals based on what you need to know.
Have your financial documents ready
Cash
If you’re paying cash, you will need proof of funds such as the last 60 days of your bank statements.
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 more about getting a mortgage for the property you’re bidding on.
Getting everything together beforehand can help you research and bid confidently on auction properties. But the most important thing to remember is to enjoy the process!
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