Dennise Williams, Staf ReporterTHIS WEEK, More Money, looks at mining for real estate diamonds. First, we discuss the possible opportunities on the auction block. Next, the financial experts speak on the matter. Then we hear from realtors about buying old properties and renovating them. Finally, contractors discuss how to approach renovation on a budget.
SOME PEOPLE see the houses and lots advertised for auction and think, "fire sale!"
They reason, if a house is up for auction that means somebody is desperate and is selling for give away prices.
Well, if that is you, just draw brakes. In this current market, auctioned properties are generally not cheaper than any other property up for sale.
So why even bother? Well, auctions do offer the chance to get a property that ordinarily wouldn't be up for sale.
And if that whets your appetite, read on.
First, why are properties auctioned? William Tavares-Finson, of D.C. Tavares & Finson Realty Limited outlines the reasons.
Mortgage defaultDivorceDebt recoveryA property that is hard to sellTo speed up the sale processTo settle family disputesMr. Tavares-Finson said, "We don't encourage auctions for the last three reasons; once the property is up for auction, the public perception is that you are in financial difficulty, whether that is true or not."
So we agree that properties are not being given away, or as Mr. Tavares Finson says, "auctioned properties are not a steal. They are generally properties that wouldn't come on the market voluntarily."
But say you want to go that route anyway.
According to auctioneers at CD Alexander Realty, there are specific steps you must follow as a buyer in the auction process.
BEFORE THE AUCTION DATE
Visit the location and inspect to the best of your ability. Usually, these properties are not vacant and the occupant is not obligated to let you inside.Decide on how much the property is valued. It is best to pay for a professional valuation, but you can get a rough estimate by finding out the general prices in the neighbourhood.ON THE DAY OF THE AUCTION
Have a manager's cheque in the amount of 15 to 25 per cent of your total bid. Mr. Tavares-Finson notes that many people are surprised that money is required immediately.If your bid is accepted, you will have to sign a Memorandum of Agreement.Pay over the deposit to begin the paper work.Be prepared to close the sale within 15 to 31 days (although some institutions allow up to 90 days).Now, many people are not successful during an auction. Why? Because of a little thing called the reserve price.
Mr. Tavares- Finson said, "The reserve price is the amount the financial institution or interested party sets as the floor price."
Auction experts say that this is usually 20 per cent less than market value and is known to the auctioneer beforehand. Therefore, the auctioneer cannot award the property to anyone bidding below the reserve price.
Essentially, the winning bid beats the reserve price.
Once the bid is accepted and the bid is paid over, the property is turned over to the respective lawyers and the transfer process begins. Usually, auctioned properties can be financed with a mortgage if necessary.
Interestingly, property auctions are somewhat of a mirror on the overall economy. Mr. Tavares-Finson explained, "In terms of numbers, there aren't as many auctions as they use to be. In the 1990s there was a lot because of the financial meltdown, but the economy has been sorted out, thankfully.
One of the things about the auction business - it is only vibrant when the economy is in problems."
Dennise Williams can be contacted by email at dennise. williams@gleanerjm.com
