You’ve probably heard of buying products online through auction sites like eBay, but did you know you can buy a home from an online auction site, too? It works pretty much like buying any other product at auction, but there are a few tips you should know — including where to find the best home auction sites online.
Understanding Online Real Estate Auctions
Online real estate auctions usually take place because a seller wants to sell their home to the highest bidder as quickly as possible or because a bank has foreclosed on a home and wants to get the highest sale price possible for the home to reduce the amount of loss the lender suffers.
Regardless of whether an individual or a lender is auctioning a home, that auction will fall into one of three categories:
- Absolute Auction: This is when the property is sold to the highest bidder, even if that amount is significantly less than the value of the home.Reserve Auction: In a reserve auction the owner or lender sets a reserve amount for which they agree to sell the house. If the bidding does not reach that reserve price, the home will not be sold.Minimum Bid Auction: This type of auction is similar to a Reserve Auction, except the owner or lender sets a minimum dollar amount for bidding to start at. At the conclusion of the auction, the highest bidder wins.
In all cases, once an auction is complete the seller must approve the winning bid. That approval can take 15 days or longer, and in some cases can result in the house being re-auctioned in an attempt to increase the amount of the winning bid.
Fees Associated with Online House Auctions
When purchasing a home through an online house auction you typically don’t have to pay real estate brokerage fees, however, there are some costs specifically associated with online auctions:
- Buyer’s Premium: The fee the auction site charges for conducting the auction. This fee is usually between 5-10% of the final purchase price of the home, or it can be a flat fee of $1,000 or more. Most auction sites use both options with the buyer paying the higher of the two amounts.Transfer Fees: These fees can be $1,000 a more, depending on the site you choose to purchase through.Auction Service Fee: Some sites change this fee instead of a Buyer’s Premium. The fee can be $3,000 or more.Technology Fee: This is a fee charged to the buyer associated with the cost of operating the auction site. It can cost you an additional $200-$500.Earnest Money: This fee can be applied to the final total of the winning bid when payment is made or refunded to a bidder who doesn’t win the auction. It is a variable amount. Most sites require 1%-3% of the total winning bid as payment in earnest money with $2,500 or more being charged before you can bid (sometimes called a Bidding Deposit) and the remaining due within 24 hours of the auction end. In the event that you cannot pay the full amount of the winning bid in the required timeframe (usually 30-45 days), you lose your earnest money.Additional Miscellaneous Fees, Liens, or Encumbrances: You could also be responsible for commissions, closing costs, tax liens, or other expenses at the time of closing.
Buyer Expectations When You Win an Auction Home
If you do find the right home and win it at auction there are some expectations you can plan to fulfill. For example, you may have to prove your ability to pay for the home you win either by providing proof of funding or a reference letter from your financial institution.
Buying a home at auction requires patience and due diligence. Plan to spend much longer finding and researching the right auction home than you would if you were using a traditional purchasing method.
You are also expected to understand that you are purchasing a home ‘as-is, where-is’ unless otherwise stated. This means no matter the condition of the home, you are solely responsible for repairs and updates.
You may also be purchasing an occupied home and, once the sale is complete, you will have to go through eviction proceedings — at your own expense — before you can take possession of the home.
Finally, some states have Right of Redemption laws you must adhere to. These laws state that the owner from which the house was foreclosed has a given amount of time (usually 6-18 months) during which they can catch up back payments and pay a fee (commonly 20% of the total home value) to regain ownership of the home. Any repairs, changes, or updates you make during that time do not have to be reimbursed to you.
Online Home Auction Sites
If you’ve made it this far, great! All that’s left to do is find the right online bidding site and start bidding on your next home. The following list includes some of the best online real estate auction sites for finding great prices on a new home.
Many of these sites and others will appear when you do a local voice search through your mobile device using the terms home auction near me or real estate auctions near me.
The Best Known Online Real Estate Auction Site: Auction.com
Even if you’re just starting to look at online real estate auctions, you’ve probably come across Auction.com. It’s one of the best-known resources for finding online auctions. The site is easy to navigate, searching for home auctions is intuitive, and auction listings contain information about the home as well as minimum bids or reserves when available.
- A full list of state requirements is available on the Auction.com site.
- Auction.com has a program, called the First Look (™) Program, which allows buyers to have access to owner-occupant homes before investors are granted access.
Slightly Reduced Buyer’s Fees: Hubzu
Hubzu is similar to Auction.com in many ways, but there is one thing that really sets this auction company apart. The Buyer’s Premium can be slightly lower than most other sites. The average Buyer’s premium is 5% of the total purchase price or $2500, whichever is higher. At Hubzu, the Buyer’s Premium is 5% or $1000. Again, it’s whichever is highest, but there are situations in which a $1000 Buyer’s Premium is much more attractive than $2500.
Member of the National Auctioneers Association.
Lists some properties that you won’t find on other sites.
Lists auctions as well as traditional sales, foreclosure sales, bank owned properties, and short sales.
The site is slow to load. Be prepared to wait when loading pages.
Charges a Technology fee in addition to other buyer’s fees.
Online and Real-Time Auctions: Service Link Auction
This online bidding site is a real estate auction house that’s run by a law firm. You may find that’s often the case with online real estate auction sites. What sets this one apart is that this site offers both real-time and online auctions and online-only auctions. They also accept pre-auction offers, which isn’t completely unheard of in the auction sites on this list, but it’s super common.
Auctions are usually limited to 2-3 days, making this a faster process than some other sites.
The current bid and bidding history are available for all users to see.
Some auctions have no buyer’s premium.
Buyers pay all closing costs, including all Buyer’s Premiums, Transfer Fees, and any other costs associated with buying the home.
Properties labeled ‘Online auction is today’ may close for bids early in the day.
Buyer’s Choice Auctions: WIlliams & WIlliams
William’s & Williams is similar to the other auction sites listed here, with one notable difference: Buyer’s Choice auctions. These are group style auctions for multiples of very similar properties where bids are made for each lot or home in the group. The highest bidder wins their first choice of the available parcels and may buy more than one at that price. Any remaining properties in that group are then re-auctioned under the same principle.
Broad categories make it easy to find different types of real estate such as residential, farm & land, or commercial properties.
Additional filters and an interactive map make finding properties in a desired area much easier.
In some cases, Buyer’s Premium is waived.
Active and upcoming auctions are buried several pages deep in the website.
Buyers pay Auction Service Fee of up to $3,000 or a Buyer’s Premium of 5% with a minimum of $1,500.
Charges a $199 Technology fee.
Those Looking for Ultra Luxury: Concierge Auctions
If what you crave in a new home is only the best of the best, then you should definitely check out Concierge Homes. Homes on this site are typically valued at $2M-$40M and they are not distressed homes. These are homes that buyers have decided they want to sell quickly for some reason, whether it’s to move funds to new investments or to liquidate cash. These are some of the most beautiful homes in the U.S., with the price tags to match.
Some auctions allow pre-auction offers, which are different from Buy Now, because the seller has the option to turn the offer down.
Buyers must register with the site to see details about available properties.
Bidders are required to provide a letter of reference from their bank to prove that financing is secured as well as (in most cases) a $100,000 Bidder Deposit.
Premiums, fees, and commissions can reach 20% of the total cost of the sale or higher.
$1 No Reserve Home and Land Auctions: Bid4assets.com
This site does federal forfeiture auctions for the U.S. Marshals Service in addition to tax foreclosure auctions and other types of auctions. One notable feature of this site is its $1 No Reserve auctions where you can buy land or a home.
$1 No reserve auctions mean you can get a great deal on a home or piece of property. Even with the $600 in fees you’ll need to pay when the auction ends.
Federal property auctions allow you to purchase homes and land seized by the U.S. government at a fraction of market value.
County tax sales seem to be limited to Western states.
Some auctions are for the down payment amount only, plus fees. The total cost of the land is predetermined.
Automated Home Auctions: RealtyBid.com
Another auction site that lists some property, though the listings are not as comprehensive as other sites. However, one particular tool is worth checking out on this site. A tool called Bid Assist(™) offers automated bidding which allows you to continue bidding up to your top price even when you’re away from the computer. One note, however, some properties on this site have a long post-auction bidding period, so winning an auction may not mean you actually win it.
Automated bidding makes staying on top of a property while you’re away from the computer much easier.
Not as many listings as some other sites.
Long post-auction bidding period means you could lose the winning bid after the auction ends.
