Scary low prices?

[Micheal Waldrup]

Just an example to see here if you want to look:

http://www.auction.com/Virginia/residential-auctio...

Something like this to me seems just scary low. The price makes me think there's a hidden hang-up with the property somewhere. 

 I see it's been listed for around 9 months, is in a decent area close to some slightly better than average schools. 

Any tips on better educating myself on properties like these?

Also, anyone have knowledge on what this is? (from Auction.com transaction details)

• A Buyer's Premium equal to 5% of the Winning Bid Amount or $2,500 (whichever is greater) will be added to all Winning Bid Amounts to determine the Total Purchase Price.

[Katharine Chartrand]

Auction.com puts a very low starting bid on properties... way way below the reserve the bank is willing to pay. Unlike hubzu, where you can figure out the reserve by bidding over time, auction.com doesn't tell you what the reserve is. Auction.com appears to be actually negotiating with the bank on each property, They don't know what the bank will accept until after they provide the bank with a purchase agreement from the winning bidder. 

The low starting bid attracts interest because that is the price that appears on sites like zillow when you search for houses for sale.  Wow! that $200K condo is for sale for $50K! Well not really but made you look.

When an auction closes on auction.com... one of two things happen.  it's either rejected right away or they ask you to sign a purchase agreement for the winning bid price that is subject to bank approval.  In my experience, if they choose to move forward with the purchase agreements, the bank generally accepts it, but not always. 

Certainly the staler the property, the lower the bank will go... I am sure that auction.com uses the bidding history on a property to convince the bank to proceed on a lower price than they wanted.  The fact that that property has been out there for a while is good.

So don't worry about the scary low price.  It's not real.  Bid on the property.  Be patient if you win but it isn't accepted.  Another auction will post.  Bid again.  They will use the data they get to bring the bank down.  Especially on a stale property, they will call you if they think the winning bid is too low to be accepted.  They will ask you to raise it.  I generally hold out.

The minimum commission auction.com takes is $2500.  It is ADDED to the winning bid.  once the winning bid goes above $50K, they take 5%... but it is ADDED. Nothing unreasonable there, just a sensible way to run an auction.

And read the fine print in the sample purchase agreement before you bid.  You will have to sign it within hours of the auction close if you win.  They have different types of sales.  The short sales are pretty straight forward.  The occupied homes, not so much. Not every type of sale they have will suit you.

Overall, I have found auction.com to be an honest and reputable company and I would not hesitate to bid through them.