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Solutions To Problems Associated With Buying Real Estate Using Online Auctions

Here are 5 things to consider before entering into a purchase company with a real estate auction.

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Solutions To Problems Associated With Buying Real Estate Using Online Auctions

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  2. 2. Buying a property through an online auction site has become increasingly popular ever since the 2008 recession. Online property auctions give sellers (usually lenders) the opportunity to sell their foreclosed and repossessed inventory (REO’s) quickly and gives buyers the chance to purchase properties for substantially less than market value.
  3. 3. Online property auctions can generate great deals, but there are also risks associated with purchasing auctioned property — usually with the provisions embedded in the auction company’s purchase agreement.
  4. 4. Online auction companies act as the seller’s agent. The “transaction facilitator” or “desk agent” does not represent the purchaser, so relying on any statements or assurances from an ‘account representative” is a poor idea. Hire your own real estate attorney or agent to assist with the transaction.
  5. 5. Auction purchase agreements are notoriously one-sided, with most rights and discretion to act or not, vested with the seller. Buyers have very few rights except for cancelling the purchase agreement performing a timely property inspection. Even then, some contracts will release a purchaser of their contractual obligations, but will refund only a portion of the purchaser’s entire deposit after poor inspection results.
  6. 6. If one is unsure of the impact of certain contract provisions, then have the contract reviewed by your own real estate attorney.
  7. 7. Buyers must be careful to review and understand timelines within the purchase agreement. There are time limits for conducting property inspections, notification, reviews, closings, and obtaining approval for financing. A Buyer’s failure to meet a specified timeline could be cause them to lose their deposit or allow the Seller to cancel the contract. Remember to get any time extensions in writing.
  8. 8. Most auction sales contracts contain ‘boilerplate” language, and buyers are often told that the ‘take it or leave it” language limiting buyer’s rights, cannot be changed. This isn’t always true. Many provisions in a purchase agreement can be negotiated, although when it comes to replacing seller’s third party vendors such as a title company or inspectors, it’s unlikely.
  9. 9. Remember, all changes to a contract in real estate must be in writing. One should secure the services of a professional negotiator such as a real estate attorney, if a buyer does not regularly engage in and negotiate real estate transactions.
  10. 10. In today’s relatively robust real estate sales market, one has to ask why a property isn’t sold on the regular “retail” market. I suspect that there is a defect in the property’s chain of title or there is a legal defect in the process in how the lender / seller obtained title. Auctions are a way to sell property without making any warranties or assurances to prospective buyers that would otherwise have to be disclosed on the retail real estate market.
  11. 11. Buying property through online auctions can save thousands. However, the process is fraught with risks. To avoid disappointment, buyers should have a real estate professional review the transaction process and terms before committing to a price at auction.
  12. 12. Since 1990, attorney David Soble has represented lenders, loan servicers, consumers and business owners in real estate, finance and compliance matters. For over 25 years, he has been involved in thousands of real estate transactions and has successfully negotiated and saved millions for his business and consumer clients. ABOUT THE AUTHOR 31800 Northwestern Hwy. Suite 350 Farmington Hills, MI 48334 Phone: (888) 789-1715 Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.