Traditional real estate almost always includes a period of time for inspections, sometime leading to re-negotiation. However, selling a home at auction regularly does not include an inspection. So how can you be sure you’re bidding with confidence?
To understand why auctions don’t regularly include inspections involves understanding that the auction method is known to be a fast and transparent way to sell. The auction process nearly always sells items “as-is” and the buyer usually has no opportunity for re-negotiation. Because of this, the majority of bidders skip an inspection and rely on their own due diligence. Though, it is important to note that this is not always the case.
An auctioneer’s approach to this topic could drastically influence the final bid amount. Even without an inspection, there are several ways to inform bidders of what they are bidding on. Oftentimes an informed bidder bids aggressively, whereas an uninformed bidder bids timidly, factoring in the unknown. For this reason, sellers and auctioneers accommodating bidders through the following channels may see better price results when the gavel falls.
Previews times and private showings available
Most auctioneers and bidders will take advantage of a pre-established preview times or schedule private showings. Typically, a bidder looking to pursue the property may have a private inspector to conduct a full property inspection. This would provide the bidder with the information they need to adjust their bid accordingly should they deem repairs/improvements necessary.
Occasionally, a seller, realtor or auctioneer may initiate a pre-inspection on a property. A pre-inspection would be included in the Property Information Packet during the marketing phase of the real estate auction. This approach globally shares the condition throughout the marketing phase.
State real estate laws may require a seller to complete a disclosure form documenting what they are aware of regarding the property’s condition. Even if it’s not law, providing a disclosure form may be a good idea because it provides greater history about the property.
Most of the time, potential buyers skip inspections due to the lack of leverage over the seller to complete repairs or offer credits. However, the more expensive the property, the higher the odds of an inspection. And the more information available on the property, the higher the bidders may be willing to bid.
If someone is bidding 60 percent of perceived value, they perhaps are comfortable bidding without an inspection and understanding they are purchasing “as-is.” However, if you are expecting at least 80 percent or even higher than the perceived value of the property, it may be a good idea to relay the condition of the property in the ways listed above.
Braden McCurdy, CAI, AARE, AMM, McCurdy Auction, contributed to this article.