When most Americans consider buying a home, they actively seek out the best deals available in their desired areas. Home auctions can be a great way to buy a home at below-market value. But they can vary from place to place, so make sure you understand how home auctions work in San Diego before getting involved.
Home auctions are traditionally a means of selling a property when there is financial distress, a foreclosure, mortgage default, tax liens, and/or bankruptcies involved. Lately, though, some homeowners are selling their houses through auctions because it offers a fair and level playing field for buyers to compete for a property. During an auction, potential buyers pay a deposit and place their bids until the highest bidder wins the house being auctioned.
For home owners in San Diego looking to sell their less-than-market-friendly homes, we make all-cash offers on your home and cover all closing costs in the process. Unlike with a home auction, you’ll work directly with our local team to get the most cash in your pocket at the end of the sale.
Reasons To Auction Your Home
Home auctions offer a transparent home-selling method that doesn’t involve prolonged negotiations and contract eventualities. Interested purchasers determine the market value of the property, rather professional estimates that may or may not attract buyers.
A home auction can be beneficial to both the buyer and seller, as it takes less time than an average real estate transaction. In general, the auction buying process takes only hours, as opposed to potentially several weeks of negotiations as is typically involved in a traditional home sale. Auctioning a house also means selling a home as-is, so a seller won’t have to negotiate with prospective buyers about repairs. Sellers also typically don’t have to fund evaluations of their apartments and houses in terms of safety.
However, selling your home at an auction can often be a more expensive process. Auctioneers usually charge a higher commission than most listing agents. While you can set a base price for an auction, you are still at the bidders’ mercy because you have no control over the final price. That’s why home auctions are usually used in cases where the homeowner has to sell quickly (e.g., after your house is foreclosed). Buyers at auctions are more likely to purchase the house at a bargain because of the risks involved in an as-is deal, such as having to pay for any unexpected repairs and maintenance that would have otherwise shown up with a home inspection.
How Home Auctions Work
How home auctions happen depends on the type of auction and the location. In San Diego, online house auctions have become more popular due to the covid pandemic.
Live auctions are more intense. They can happen anywhere from outside a courthouse, to the actual property being sold. Most auctioneers place a minimum bid in advance, and the highest offer above the minimum bid wins the house. A reserve bid can be used when the seller does not publish the minimum bid and wants to be able to accept or reject any offer. In rare cases of an absolute auction, there is no starting bid. Instead, the highest bidder wins—regardless of the amount of the bid.
Every auction has its own rules, but buyers should expect to have to put down a sizable deposit up front. To even participate in a home auction in San Diego, 10% of a home’s projected value in the form of a cashier’s check is required beforehand as a deposit. If you then win the auction, you will have to pay the balance of the winning bid amount in full with cash or a cashiers’ check. If the full price is not paid immediately after the auction, or within a specified time period, the buyer forfeits the bid, and loses the deposit and property—and may be banned from future auctions. Losing bidders typically get full refunds for their deposits.
The Bottom Line
Most homeowners in San Diego who want to sell their home put their property on the market and seek a buyer who will pay their price. In cases where it’s not up to the homeowner to set a price, such as a foreclosure or probate sale, a home auction is a possibility. Prospective buyers at an auction usually have to put down a refundable deposit before they can bid on the house.
In most cases, the starting bid is preset. If you’re looking to buy or sell a house at an auction, it’s important to first do some due diligence. Sellers also need to research the auctioneer to make sure they’ve had a lot of past success auctioning homes to increase your chance of getting as close to market value as possible.