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Real Estate Auctions: Here's What You Need to Know

Do you want to participate in a real estate auction and do not know how to do it? Here you can find all the answers!

Real Estate Auctions: Here's What You Need to Know

Buying properties at auction is a smart idea to save on the starting price and speed up the allocation procedures, but it's not all gold what glitters, so here's what's important to know before participating in an auction:

  • what are the real benefits of buying at auction
  • how an auction works
  • what information and documents to consult about auctions
  • how to visit the property before the auction
  • how to participate and make an offer

Certainly property prices are much lower than market prices, but many think that real estate auctions hide pitfalls and risks for which they would not really be affordable. 

Let's get some clarity.

Are real estate auctions really good?

Buying a property at auction is the ideal option for those on a tight budget and want to save on purchase. You've heard that often, but is that really the case?

You should know that real estate auctions are used to resell properties owned by bankrupt individuals (for example, companies) or individuals who, for various reasons, can no longer pay mortgage instalments. These properties are foreclosed and then sold at auction to liquidate the creditors or the bank that granted the mortgage.

An unpleasant situation, therefore, even if the buyers have something to rejoice: in order to ensure that the sale ends quickly, in fact, very attractive starting prices are set. And, if the first auction goes deserted, the price is lowered further in subsequent auctions, making the purchase even more affordable.

Undoubtedly, auctions are the best way to save on buying a home, and not just for property prices. This type of sale also avoids some typical expenses of traditional sales, such as the notary and mediation costs required by real estate agencies. Costs, these, that affect not little when buying a property in the free market.

The highlight of the issue concerns, of course, the costs to be incurred after the award: in addition to paying the taxes demanded by the State (VAT or registry tax), you will have to consider other costs, such as any back-to-back condominium costs or renovations. That's why you'll need to carefully consider the status of the property before participating in the auction.

In any case, the pitfalls can be the same as you would also have in the free market and relate to issues such as constraints, mortgages, occupied property or morose tenants.

How does a real estate auction work?

In the collective imagination an auction takes place in a room full of people with an auctioneer who directs the sale and the public who, raising a shovel, competes for a work of art or an ancient object trying to make the highest bid.

A real estate auction may not have the same appeal, since it takes place at the Tribunal or the study of a designated professional and requires a whole series of bureaucratic requirements that could be complicated to non-experts.

In the meantime, you need to know that not all auctions are the same. In fact, depending on the different methods of presenting the offer they stand out in rods without enchantment and with enchantment.

In the type without enchantment the offers are presented in a closed envelope and at the opening of the envelope the highest bid is awarded the auction. While the one with enchantment is the best known type of auction, in which raises are made directly on the bids of competitors.

What information should I consult about auctions?

To find the most important information about the property you want to buy you can consult some documents by going to the Chancellery of the Court or even online, in the case of telematics auctions.

It's really easy to know when a new auction is being held. In fact, by law, each auction must be properly advertised through the publication of the sales notice (auction notice) at least 45 days before it begins. Today, thanks to the Internet, the whole process is even more immediate: just a click of the mouse to get the complete list of real estate auctions, divided by court or region.

Let's take a step back. Before a property is auctioned, the judge instructs a professional to draw up an estimate report, to determine the value of the property. This is a fundamental document since it contains all the most important information related to the real estate unit, including the land data, the floor plan, the description of the features, the current state in which it is located and, above all, the indication of any occupants (tenant or owner).

By consulting this document you can be honest about important issues such as constraints, mortgages or the presence of tenants who are morose. These are things that should not be underestimated if you intend, for example, to purchase a house at auction. That's why you'll need to carefully read the estimation assessment and analyze its contents before participating in a real estate auction.

Another key document is the auction order, issued by the court to define how the auction will be held and the elements that characterize the sale, including the starting price, the date of the auction, the maturity and information relating to the deposit and the balance of the final price.

Is it possible to visit the property before the auction?

Once you have identified the property of your interest and after consulting all the documents related to the appraisal and the order of sale, you can proceed to the visit of the property: to do so you can contact the judicial custodian – the person in charge of the management of the property – or the agent of the sale.

You will be able to assess the conditions in which the dwelling is located and ask directly from the judicial guardian for more information about the property, the way of sale and the urban, legal and land situation of the property.

Viewing the property you are interested in before participating in the auction is definitely a big advantage as it will avoid the risk of incurring "unpleasant" surprises after the award.

How to participate in a real estate auction?

We have reached the most important moment, that of the offer. Have you found the property of your dreams and would like to make an offer to award it to you? Here's how you can participate in a real estate auction.

To bid, you have to follow different modes depending on whether it's an auction with enchantment or without enchantment.

In the case of an unenchanted auction you must send the offer in a closed envelope, including a deposit equal to 10 of your offer and all other required documents.

If, on the other hand, the mode of conduct provides for the enchantment you must express your willingness to participate in the auction by paying the deposit requested by the tender.

If an auction takes place without enchantment, even a single bid is enough to win the property, as long as the amount offered is at least one-fifth higher than the base price of the auction. In the case of sale without enchantment the award is final: you will win the property after presenting the highest raise on the base price of the auction.

In the sale with enchantment you will have to go to the place established in the sales order on the day the auction is held. In this case, the auction takes place before the designated judge or professional and you will need to submit an application in legal card that shows your intention to participate in the tender, together with the deposit in the amount indicated in the notice of sale and the documents requested by the notice.

Finally, in the case of a sale with enchantment the allocation is only provisional since 10 days after the closing of the tender it is possible to submit a higher offer (as long as it is more than at least one fifth of the award price). In which case another tender will be held open only to the participants of the first auction.

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