Online Auctions?

Question

What are people's experience with online auctions, specifically with auction.com? What are some of the things that I need to be aware of when placing a bid on a property that is being auctioned off online? My biggest concern is whether or not title on these foreclosed properties have any liens that would transfer over to me if I were to win a bid on a property.

Brian Burke · Answer

@David Stefanovic, you need to read the terms and conditions of the specific auction you intend to bid on. Terms vary from site to site and from auction to auction on the same site. You want to pay close attention to how title will be conveyed to you.

If you will receive a warranty deed or grant deed you'll likely be receiving clean title. In some auctions you can even purchase title insurance.  If you are to receive title via quitclaim deed, the title is whatever it is and it is up to you to determine if there are any liens that will survive the sale. This task can range from simple to extremely complex and shouldn't be taken lightly.

As for your question as to what you need to be aware of...what you need to know is that these online auctions aren't auctions at all.  An auction is where an opening bid is set and then the highest bidder gets the property. That isn't what happens here.

The auction company will be bidding against you until you drop out of the auction.  If you were the highest "legitimate" bidder, the auction company will call you after the auction is over and tell you that the high bidder dropped out and you were the second-highest bidder so they are moving on to you.  They will then submit your bid to the seller to see if they want to accept it, which they may or may not, or they might counter you at a higher price. The auction was just a method to fish out your max bid and get you to submit an offer that is binding on you but not the seller.

Michael Hayworth · Answer

@Brian Burke is correct. There's a lot of fishiness with the online auctions. However, there can be some good deals there, still.

The only auctions I'll bid on thru auction.com are the ones with no buyer's premium. Many times, these are properties that didn't draw a bid greater than the reserve at the trustee auction on the courthouse steps.

The nice thing about auction.com, though, is that they do a basic title search on their foreclosure properties.  My recollection is that most auction sites don't do that. For example, on this property:

http://www.auction.com/texas/residential-auction-a...

If you click the Foreclosure Information button and download the attached document, you'll see an IRS Lien for $71,000 (which, as I understand it, is no big deal, but does give the IRS 120 days after you purchase it to redeem the property for what you paid for it), and a lien by Texas Workforce Commission for $2100, which will survive foreclosure and keep you from getting clear title until you pay it off.

Anna Ayala · Answer

I'm an investor in south Texas and I'm looking into a house being sold at auction. I'm very new to the game so what should I asked the realtor the next time we talk? The realtor told me that the auction requires a credit card on file for at least $2200 to be put on hold while the auction starts bidding for 27k and lasts for 4 days. I'm kind of hesitant to start on online auction since this will be my first deal. What do you y'all suggest?

David Stefanovic · Answer

Thank you to all who responded for your insight!! Very informative. Definitely due diligence is much needed for these type of properties that are being auctioned off online. Thanks!!

Sandra Gibson · Answer

I have seen that properties that do not qualify for financing eventually go to auction. Be aware of an expensive flaw. Be very skeptical of occupied properties, no inspection, cash only, you find out what the problem is the day after you bought it.

Chad U. · Answer

Why not just do a search for this in the forums? You'll get hundreds of hits of what to lookout for.

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