Today I’m answering your question, how do real estate auctions work? The topics I’m going to cover are:

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Different Types of Property Auctions

How do real estate auctions work? First, let’s give you some insight into the different types of auctions, and let’s separate the traditional auctions from the government auctions.

Also, I’m going to give you information about a segment of the real estate market that is little-known but highly lucrative. It does involve auctions, but first, let’s learn the differences.

Most often people think real estate auctions are only distressed financial situations like foreclosure and bankruptcy. Well, that’s not entirely wrong, but that’s not right either, so let’s take a look.

HUD Government Real Estate Auctions

How do real estate auctions work at the federal level? The federal government has an agency that is called HUD – Department of Housing and Urban Development. They finance many properties, and as a result, when properties default they go back to the federal government.

The federal government agency, HUD, created a no hassle, no contingency auction process. It is called an auction, however, the government posts the properties for sale on a long list at a price which is take it or leave it.

Many buyers take it after looking inside and outside the property. These buyers are somewhat desperate for financing, so they become fixers and handymen to take these properties off the government’s list. However, the government gets them financing which is very important. Otherwise, many would not qualify at the local bank.

Brokers like this market because they’re assured real estate commissions.

how do real estate auctions work at the federal level

Property Sold As-Is at Government Real Estate Auctions

How do real estate auctions work for property buyers? Government auctions include contracts with narratives that plainly point out “sold as-is,” which means whatever is wrong with the property the purchaser is responsible for it.

Of course, that sounds a little scary, buying a property with no warranty. However, from the government standpoint, they have a sale that’s certain because the buyers cannot return and claim repairs or problems with the property.

All sales are “as-is” sales, and the government resells used and abused properties by the thousands every year. More than one agency sells these properties.

For example, the Department of Veteran Affairs is also a government agency that will take back properties for nonpayment, and those properties are listed. The government does not haggle; they just say, “This is the price, you like it, then buy it or forget it”.

Local County Tax Defaulted Real Estate Auctions

Let’s continue to a new and different area, tax delinquent real estate, which is easier on your wallet and you have a better opportunity of making money.

I’ve been involved with tax lien certificates and tax defaulted property for over 30 years. Nationwide all 3,000+ counties are authorized to sell tax-defaulted real estate. These are properties that are seized because the owners have failed or refused to pay the property taxes and sold at auction.

These properties are single family homes, small farms, small apartment properties, and even small office buildings.

How do real estate auctions work at the local level? I think you’ll be pleasantly surprised.

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Big Discounts at Tax Defaulted Real Estate Auctions

The bidding at these tax delinquent property auctions starts at the back taxes, which could be as low as 10 to 20 cents on the dollar of the tax assessed value.

Each property will have a tax-assessed value determined by the county. However, the auction price will be a starting bid of at least the back taxes.

The tax assessed value is assigned by the local tax collector and will be considerably different than the starting bid at auction.

The starting bid is determined by the county treasurer who is motivated to generate revenue which the county needs to maintain infrastructure and pay county employees, like school teachers, police, and firefighters.

How Tax Defaulted Real Estate Auctions Work

How do real estate auctions work at the county level? The auction rules can be significantly different from county to county.

The tax defaulted real estate is posted for auction on the county website and announced in the local newspaper. Anyone with money to bid may attend the auction.

Auctions are held online or on the courthouse steps live. The highest bidder wins the property.

how do real estate auctions work at the local level

How do real estate auctions work for bargain hunters? Many auctioneers working for the county treasurer will start the bidding at 10-20 cents on the dollar, and the auction is transparent and public for everyone to see.

Many auction properties are sold 60%, 70%, and 80% below the tax assessed value, and the mortgage or deed of trust loan will be canceled and deleted by the treasurer.

The auctioneer will have very specific rules for engagement meaning how they will conduct the auction and the requirements for deposits and methods of payments. These are very strict.

The auctions are final and no refunds. Once you have a property transferred by deed and the deed is recorded or you have it in your hand, you are free to sell or maintain the property.

Reselling a Property Bought at a Tax Sale

It has been my policy to teach newcomers and buyers at auctions to buy low and sell low which is somewhat contrarian, at least to most real estate people.

My method is designed to guide many newcomers to be able to sell quickly by not overpricing the property, selling considerably under the market and attracting bargain hunters, like fixer upper people, property flippers, and real estate rehabbers.

This selling process will allow you to succeed in the marketplace.

Doing Your Research Before Buying Auction Property

The key to the vault for auction buyers is preparation which means due diligence or looking at the property. “Boots on the ground” is a simple statement, however, checking the property condition is a must.

It’s dangerous for your wallet and your net worth to bid on a property without knowing its condition. Once you have bid and the gavel in the auctioneer’s hand comes down, you are the new owner and it’s too late for due diligence.

Conclusion

We hope you enjoyed Ted’s lesson, “How Do Real Estate Auctions Work?”

Real estate auctions can be a real bonanza for bargain hunters, particularly local tax defaulted property auctions, where real estate is sold mortgage-free for pennies on the dollar.

Auctions are held both online and in-person, and the highest bidder wins the property. Auction rules are strict. All sales are final, and properties are sold as-is. Do your due diligence and research the properties before you bid on them.

If you’d like to know more about tax delinquent property investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.

Learn how to reap huge rewards from tax lien and tax deed investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!

how do real estate auctions work by Ted Thomas

Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.

Ted Thomas is not an attorney, real estate broker, or tax advisor, but a guide, author, investor, and publisher.


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