The local auction house that does farm sales is putting a nice hobby farm up for auction in a month or so. It’s 40 acres with a house and some outbuildings; they are auctioning off all the farm implements and then the property. This is an estate sale; it’s not a foreclosure auction. I’ve never bought property at auction before. Aside from getting an inspection and a thorough title search, is there anything else to keep in mind? Is this just a bad idea if I haven’t been hanging around real estate auctions my whole life? The sellers have an attorney listed; is it appropriate to contact him regarding the title? Should I have my own real estate lawyer? I can understand the heirs wanting to settle the estate quickly with an auction, but what nefarious purposes might they have for disposing of the property in this way? No requirement for disclosure of known defects for example?
If you don’t know the item you’re buying as thoroughly as if it was yours to start with, you have no business bidding… at least, with any money you wouldn’t spend on lottery tickets.
Selling real estate by auction is more common in rural areas than urban areas. Why don’t you call up the auctioneer and ask him those questions?
How much experience do you have at buying real estate outside of an auction? My parents used to make a killing buying rural real estate at auction in the late 80s and early 90s, but they had positive experience with real estate besides auctions.
I’ve been tempted to follow suit and at least learn more about buying real estate at auction, but I too have prior experience investing in real estate.
I don’t think there’s anything “bad” about it, but real estate is awfully expensive if you don’t know what you’re doing.
Make sure there aren’t any drastic changes happening or planned or rumored in the surrounding area, like a frac sand mine, a huge feedlot, or a controversial power line project. Check for issues related to waterways; have there been recent floods or pollution issues? Looking at back issues of local newspapers can be helpful if you don’t have local contacts.
I don’t see how it’s that different from buying real estate in the usual way, and who buys a house or land knowing it “as thoroughly as if it was yours to start with”?
To the OP: you want to have looked around and have some idea of what similar properties (if any) in the area have sold for lately. And you need to have a pretty good idea of what you can afford, and what it’s really worth to you - what are you going to do with this property if you win the auction? Are you planning to retire there? Keep the farm running? Are you trying to buy it at less than it’s worth, then turn around and sell it for a good profit when an opportunity arises? What it’s worth to you depends a great deal on what you plan to do with it.
In the “usual way” title searches are done. At auction, you could be bidding on a piece of property worth $500k! Little do you know that there are 14 mortgages and 6 tax and judgment liens on the property unless you do your diligence.
I don’t know anything about US land law and conveyancing practice, but if your comment makes any sense at all I’d be very surprised. It certainly would make no sense in Australia.
Are you saying that land is sold at auction under terms that mean you don’t have recourse if the seller doesn’t have clear title to what they are selling? I really doubt that.
And even if that were the case, couldn’t you do the title searches before auction?
I’ve bought a couple of properties at auction. The main thing is just to do the research you would ordinarily do to determine the price you should pay. Then bid up to that amount. Then stop.
Doesn’t make much sense to me, either. I’d think one could get into legal trouble for substantially misrepresenting what they’re selling.
The seller may not have to have clear title, but I’d expect they’d need to describe any encumbrances to the title (mortgages, liens, easements, whatever) when asked about them, and give the dollar amount where applicable.
Which is something every buyer of property should always do.
Hie thee down to the Registry of Deeds and spend a couple of hours - interesting and instructive.