Buying A Home at Auction
Buying a home at auction in major cities for $1000 look like a sweet deal. Imagine, buying a beautiful Tudor style home in a historic area for only $1000!
Well, there is more to it than that.
These properties are frequenly auctioned to pay off tax liens, and they come with a lot of conditions for buyers. There often are significant improvements to be made as well.
We’re not saying these aren’t good deals for investors and buyers – but you have to go into it with your eyes open. Know the rules, and know the costs and risks.
For example, the City of Detroit has launched a big effort to auction homes that have been abandoned due to tax issues and other troubles related to the economic downturn there. The auction prices start at $1000 and are charged to a credit card when you bid. Many of the homes are in good locations, and have classic design and construction. For the investor or future home owner who always wanted to purchase and renovate historic homes, these present that opportunity.
But – there are rules. And buyers are warned that the final cost of rehabbing the property may well be more than what they paid for it.
Many homes on these bargain auctions are missing such items as furnaces, water heaters, or workable plumbing. There may also be additional tax liens against the property.
Here are the rules for bidding on these historic opportunities in Detrit:
1. The autctions are only open to Michigan residents. You may not ow hack taxes or hav inurred tax liens on other properties, as an individual or corporate entity. You ma not also have incurred blight violations.
2. Within 30 days, you must present a signed agreement with a contractor to perform repairs and construction.
3. The ten percent down payment minus the $1000 initial bid must be paid within 10 days. Financing must be completed within 60-90 days, depending on the final price of the property.
4. A certidicate of occupancy must be issued and the property occupied by a resident within six months. For historic homes, this can be nine months.
Failure to comply with any of these rules will result in losing your money already paid, and prevent you from purchasing other auctioned properties from the city.
As with any investment or purchase, its best to go into hese with your eyes open. Attend the public open house pre auction, and bring your flashlight. View the pre auction inspection reports. Ask questions. Always have your final figure in mind for your total outlay.
If you are purchasing as a home owner, this can be a great opportunity for you to purchase a home with some sweat equity. If you are an investor, it’s hard to guarantee that you will have the home up to code and sold to a new buyer within the designated time. It’s more likely that you will hold the property and rent it out, building equity, and sell at a later time.
Contact me to find great investment properties