Home Auction Checklist of the Savvy Seller and Buyer

For the savvy homeowner, the selling activity is always an exciting and rewarding experience. However, there will be instances where things will not turn out the way you expect them to be. There are simply a lot of variables that are beyond your control. The moment you put your home on the selling block, the length of time of your stay on the market will also be measured, until your home is finally sold.

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One of the issues that you have to take into account is the emerging trend of moving homes for sale through auctions. It is seen as a logical option when selling homes on the fast lane, albeit with some downsides that tend to deter most homeowners. Going for better selling opportunities by putting homes on the auction block is turning out to be a viable strategy for those who want a quick sale of their properties. This is especially viable when conditions allow for more flexibility when it comes to the final selling price of the home being sold through auction. That being said, it is still important to note that despite the high probability of making a sale in as fast as 3 - 4 weeks, not all homeowners will find the final selling price attractive.

If you find auction an attractive proposition, then it is important that you observe due diligence and adopt this simple procedure to ensure that you get the most out of this selling option.

1. Determine your profit margin

You primary concern is your allowable spread when selling your home through an auction. How much money are you willing to accept when selling your home? It is essential that you are aware how low you can go as far as your selling price is concerned. The amount must be sufficient to cover your mortgage and help you get settled in your new home. There will be instances that the auction price will not be sufficient to cover these two critical cost items. This means that you will have to provide the bridge fund to cover the deficiency. However, this is not a real concern if you have sufficient equity.

2. Compute the fees and charges

The auction house will take a certain percentage from the auction price of your property. The fees will normally start at 6% and upwards. Thus, you have to make sure that you get the sharing arrangement with the auction house in writing and consider all scenarios so you don't get blindsided by hidden charges. The last thing that you want to happen when selling your home through auction is getting hit by expense items that were not taken into account prior to the determination of the minimum margin.

3. Choose the right auction house

Most major cities have good auction blocks that cater to homes for sale. It is best that you gather relevant and current information so that you can link up with the right auction house. Your ideal choices are those companies that actively advertise their service and have a reputation of being a consistent fast seller of properties.

4. Consider absolute auctions

There are two routes to choose from when you decide to go for auction. The absolute auction involves the sale of the property to the highest bidder. This auction type is a surefire way of selling your property when your primary concern is the speed by which you can make the sale.

However, this type of auction will leave you with no other recourse but to accept whatever amount the winning bidder submits. This makes it a risky proposition, and you have to seriously assess your chances and manage your risk so that you don't get burned when you opt for this type of auction.

Learn how to sell your own house here: For Sale By Owner

If you're looking to buy a home from an FSBO listing check here: FSBO Listing

Article Source: http://EzineArticles.com/?expert=Laurel_R._Lindsay

How to Avoid Misleading Comparable Sales in Real Estate Investing

Almost the first thing an investor does in deciding if he has a deal to make an offer on, is to determine the After Repaired Value (ARV). If he is wholesaling the property he needs to leave enough spread or profit margin in the property when he sells it or the buyer can't rehab it and resell it at a profit. If he is buying it to rehab himself, he can afford to pay more than if it was a wholesale deal, but he must have an idea of what he can sell it for after he rehabs it.

Investors buying to rent and hold properties are usually most concerned with the price so they can determine what their cash flow will be monthly. If they are buying single family homes to rent, they are doing this with the intent of renting until the market firms and then taking a large gain out in the years to come - a retirement nest egg so to speak.

The usual way to find comparable sales is to search the public records, MLS, or an online service that shows sales for the past few months. Comparable means the property is within a specific geographic area around the subject property and within +/- 10% of the square footage of the subject property. Over the years lenders have changed their criteria for lending and have gone from the last 12 months to the last three months in terms of recent sales. Often lenders want a comparable sale to have been on the MLS, so they can see pictures of it, or within the same neighborhood.

Usually finding comparable sales is reasonably easy but it can have some real problems if the lots are large, for example many acres each, houses vary greatly in size in the same neighborhood, other similar properties are distressed sales (short sales or foreclosures), and few or no recent sales to name a few problems. One of the most overlooked problems is mortgage fraud where a straw buyer has been involved.

A straw buyer is a person who purchases a property and tells the lender that he will be living in the property. Actually the buyer is just lending his credit to the purchase of the property. The seller has actually recently purchased the property for a much lower amount ($100,000 as an example) and is selling it to the straw buyer who believes the seller will be making the mortgage payments for him until he re-sells it at a profit.

Unfortunately the seller is a con artist who takes the $100,000 profit, rents the property and collects rent from a tenant, but never makes more than a couple of mortgage payments. This scam is set up by doing an initial purchase by the scam artist of another property at an inflated value and closing for cash (remember he is paying himself) to establish an actual sale price in the neighborhood. With this new high sale in the area he can start doing as many fraudulent transactions until he gets caught or moves on leaving the straw buyer in foreclosure. The result is a sale that can be 30% to 40% over FMV at a comparable sale for an appraiser who comes later.

While it may be an effort to look at each comparable sale in the neighborhood, it can save a buyer from overpaying on a property. The final issue that I see as being misleading in comparable sales is where the interior of a property has had massive upgrades, especially historic structures where they can turn into money pits quickly. The buyers of these rehabbed properties can over-pay because they fall in love with the property which causes this comparable sale to be distorted.

The best way to determine what you can sell, or buy, a property for is to call every listed and for-sale- by-owner property in the neighborhood, see the properties and negotiate to buy each and every one ruthlessly until you get the seller's final price. This price in each case is your real competition, not possibly unreliable comparable sales.

Article Source: http://EzineArticles.com/?expert=Dave_Dinkel