It may be wise to avoid the real estate auction market because it is highly competitive and carries with it many financial risks. Some risks arising from the auction process occur during the settlement period. For instance, should you encounter a condition with the auctioned property that you need to remedy prior to transaction settlement, it is often you who gets stuck paying the cost of the repair.
It is important to be cognizant of the fact that your auction deposit is binding. Should you fail to proceed with the purchase, your deposit will not be refunded, which is a clear risk. Also, auction contracts do not have contingencies like normal real estate escrows; another risk. As a result, the auction method of investing in real property does not work well for every buyer.
So, how do you avoid the risks of real estate auction purchase? Find an experienced real estate agent that specializes in the area that you wish to purchase a property and let them know you are interested in buying properties in the short sale process. Often real estate agents are contacted by individuals who can no longer afford their mortgage and are looking to short sale their property. These agents need to then turn around and find a buyer for the property being sold. Often the bank or financial institution holding the loan will only approve a short sell if there is third party offer already on the property.
If the agent is aware that you are a buyer of properties in the short sale process they will often call you first to get an offer. Put yourself in the position to strike first on the great deals that can be found in the distressed property market by building a relationship with a good real estate agent.
To find a reputable broker, your first step should be talking to friends or neighbors to ask for personal recommendations. Make sure you identify a real estate agent who is intimately familiar with your target investment area. Also look for agents who either specifically live in your area, or who have the majority of their sales in your target community. You should always consider carefully using an agent who is a registered Realtor. Realtors are licensed by the state and by the National Association of Realtors.