Real estate auctions are often times held up as the key to finding wealth in real estate.  Dozens of real estate gurus have sold expensive packages on network television infomercials that contain the same basic information as this article.  In these packages, auctions are touted as the easy way to riches.  While this may be somewhat true, it’s not often the case.  Many of the benefits of a real estate auction depend on what kind of auction it is and your understanding and willingness to go about it the right way.  I will talk about different types of auctions and the pros and cons of each.

The first type of auction, is your standard auction held by a private auctioneer.  The auctioneer will post in the newspaper and will sell several houses in an auction open to the public.  These properties are just standard properties, perhaps owned by someone who wants to unload their properties quickly without waiting for the sales process to complete.  While it is possible that a private auction can yield a bargain, keep in mind that the owner of the property is probably trying to get rid of the real estate quickly because otherwise it would take a long time to sell.  The auction probably has a minimum, meaning that even if the property is somewhat cheap, it won’t be an absolute bargain.  So, while it might be a good idea to attend some of these auctions and you might even get a good deal, you probably won’t find the best deals there.  These types of auctions are not bargain auctions because they aren’t the government (federal or local) auctions where the true bargains are found.

Which leads us to the second type of auction, which is the government auction.  Online, the predominant auctions are United States federal government auctions.  One site you might want to look at is http://www.bid4assets.com.  You will find a number of government real estate auctions.  Generally, the prices will be cheap.  The only problem is that after years of infomercials and hucksters plugging books on these types of auctions the number of people who know about them has grown.  The government agencies know the auctions are popular, and they force a minimum bid that isn’t much lower than market value.  While you might find a good deal there, prepare to be out-bid.  If a property is available, it’s probably in poor condition and will require time and money to fix up.  Keep in mind that many of these houses were outright confiscated by the government, so anything they collect is profit and they aren’t in the business of fixing up a run-down house.

This is the end of the first part of this two part article on real estate auctions.  To read part 2, click HERE.

Written for Richbitchitch.com by Rick Hyland

Getting Started In Real Estate Series

Part 1: Finding Cheap Real Estate

Part 2: Investing in Real Estate Abroad

Part 3: Real Estate Auctions Part 1 of 2

Part 4: Real Estate Auctions Part 2 of 2

Part 5: Should I invest in residential or commercial real estate?