Download this auction checklist to help you get past the auction finish line!
Buying a property at auction can be a great way to get the best price on the right asset, but the inexperienced buyer could possibly find themselves in deep water if things go wrong. That’s why due diligence is a key step before you ever place a bid.
What is due diligence?
Due diligence is research that you do before bidding on a property auction. 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).
When it comes to buying a property at auction, doing your due diligence isn’t just part of the transaction — it should be a top priority. It’s easy to want to side-step a few of the more tedious or dull parts in order to get a bid accepted, but that can cause major issues that can come back to bite you in the end.
Why is it important?
Due diligence gives you the best opportunity to walk away from an auction having made the right choice. The right research is key to making sure a property ticks all your boxes and doesn’t come with any unwelcome surprises, like liens or other title issues.
If you are able to put in the highest bid on a property, you do so with confidence that you understand the property and have paid the right amount given your needs and intentions.
If you don’t manage to come away with the highest bid, the effort you put in before the auction will help you feel reassured that, while the right property and price didn’t happen today, it will soon.
What should you research in your due diligence?
Doing thorough research can feel like it takes a lot of effort, but don’t take shortcuts. There are some key elements of due diligence that a lot of novice buyers might be tempted to gloss over, but they are very important when it comes to selecting a good investment property.
Gaining insight into the property, its surroundings, and any potential issues related to it before taking part in an auction can help you be prepared for any difficulties that may come up if you find yourself with the highest bid.
- Access: Visit the property inside and out—but only if it’s available to the public. If not, take a drive past the property to get a glimpse of the outside and the surrounding neighborhood.
- Neighborhood: Scope out the neighborhood details like nearby businesses, schools, surrounding amenities, and other attractions or services in the area.
- Price trends: Get a handle on the area trends in the area for comparable properties to the one you are interested in bidding on. You can also research how the value might be impacted by renovation and what rental trends may look like for the area, depending on the property and your investment strategy.
- Occupancy: First, check the property’s page for its occupancy status. If it is occupied, look up the rules for how to handle occupancy in the city/state where the property is located. Do not disturb any occupants — it is a criminal offense to trespass on properties that do not allow access.
- Title information: Take a look at the the preliminary title for the property. You can contact the municipal title and records department for additional title information, such as any liens or other issues associated with the deed that you will be responsible for as the buyer.
- Property detail page: Read the auction disclaimers and all the documents on the property detail page to understand everything that will be included in the sample contract.
Performing due diligence gives you all the information you need to know to bid with confidence. If find out that a property doesn’t work for you, your budget, and your strategy, you can skip that auction and saves yourself and the seller time, energy, and ultimately money.
However, this list is just here to get you started. Depending on the property you’re looking at, you may not need to go through each and every item on the list, or you may need to investigate further.
So before auction day arrives and you enter the event, you’re going to want to get this research completed. This handy checklist will help you cover the need-to-know basics before you bid.
Real estate investing involves risks. Results may vary.
