The Benefits of Buying at Auction in Today’s Real Estate Climate
Are you looking to purchase a home but feeling overwhelmed by the current real estate market? You’re not alone. There are several reasons for this hectic home-buying climate. We're living in a seller's market which means it is an ideal time to sell your home but a difficult time to purchase. The lack of homes for sale combined with historically low interest rates have pumped up the competition for potential buyers across the country.
Why are there so few homes for sale? One of the main reasons causing this imbalance is too many buyers versus too few sellers. In fact, sellers are being stunned by numerous offers on their homes, all usually offering over the listing price. According to the Philadelphia Inquirer, Redfin reported a home in Washington D.C. that received 129 offers and sold for double its asking price.
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In an article by Better Homes & Gardens, one of the major contributing factors to the current real estate climate is the lack of inventory. “[Homeowners] are not wanting strangers (potential buyers) traipsing through their living quarters amid a global pandemic, thus far fewer homes are being put on the market for sale. There is also a shortage of new construction available. Even though things are starting to pick up, a large portion of construction and lumber mills were shut down for a period due to the COVID-19 pandemic. The cost of building materials escalated dramatically because of supply and demand dynamics with the home renovation craze that swept the nation in 2020. Forbes stated in an article that this is a “housing-specific” issue, not the result of general inflation.
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Another new development is that the millennial generation has joined the home-buying market in full force. Insider stated that “millennials led all generations in homebuying last year, according to Apartment List's Homeownership report.” Millennials are feeling cramped in their pricey apartments and dreaming of more square footage and backyards, especially after a tiring year of lock-down and working remotely. In a real estate article written by Martha C. White, an NBC News contributor, she states that “the swelling population of millennials is seeking to transition into larger homes to accommodate families.”
What does all of this mean for buyers? This cutthroat competition is making it extremely difficult for buyers of all generations. At Alderfer Auction, our real estate auctions can offer a different approach to this market which benefits buyers and sellers.
Typically, when submitting an offer on a home, there is a waiting game as you hold your breath and wonder if a no-contingency cash-offer outbid you. At a real estate auction with Alderfer Auction, you pick your price and watch the bidding in real-time. There is no mystery to where the price is. If you are outbid, you can immediately bid again while the auctioneer is selling. This is a huge benefit compared to traditional ways of submitting an offer. If anything, it saves buyers from the never-ending roller coaster of emotions that comes with trying to find the right home and waiting to find out if your offer was accepted.
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What if you’ve never been to an auction before? Let’s demystify some common misconceptions and break it down step by step. First of all, real estate auctions commonly have a stereotype associated with them as being cash-only sales. This simply is not true at Alderfer Auction. The majority of our properties go through the typical mortgage lending process. If you need to obtain financing, you can apply for pre-approval for a conventional loan. Depending on the terms of the auction, certified funds will need to be shown in order to register and bid on the real estate. This shows Alderfer’s that the buyer is eligible to purchase and bid on the home.
Many people associate real estate auctions with sheriff sales, or distressed properties. This is also a common misconception. The auction method makes it easy to buy real estate but with any large purchase, you should always do your research. Conveniently, we lay it all out on the table for you: We offer times for the buyers to view the property in person. We also offer property information which includes professional photos, room measurements, seller’s disclosure, title search, and any inspections that were elected to be done for the property. You are even able to bring along a contractor or inspector to the showing times.
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On auction day, you have the option of bidding in person or online. A staff member will communicate bids from our online platform to the auctioneer who will accept them along with bids from the live bidders. All of our online bidders have to make the same preparations as live bidders to prove they have certified funds to make the purchase. Once the auction begins it will only take about twenty minutes, so be prepared to jump in! The auctioneer will do a quick overview of the terms and conditions for that property and then begin their auction chant. The auctioneer will open the bidding to all participants, live and online. After a few minutes, the auctioneer will pause bidding and take a moment to walk around the crowd and see if anyone has any other questions. Then, the auctioneer will re-open the bidding so buyers have another opportunity to place their last bids. The auctioneer will then sell the property to the highest bidder.
If you are the high bidder, you and the seller will sign the initial paperwork and the predetermined deposit of certified funds will be transferred to the auction company where they are held in a non-bearing interest bank account. Depending on the terms and conditions, a settlement date will be set allowing enough time for you to receive a mortgage. You are encouraged to choose your own closing company for settlement day and the auction specialist is also available to help you with any questions you may have about that. On settlement day, all paperwork will be signed by you and the seller and the deed to the property will be signed over as well. The deposit money held by Alderfer’s is made out in a check to the closing company to go towards any closing costs. We will then hand you the keys, making you officially a homeowner!
The auction process is daunting to those who haven’t walked through it before. At Alderfer Auction, we’re here to help make your homeownership dreams a reality by making the process as simple as possible. Our auction specialists are here to assist you each step of the way.
by Hayley Schaffer