This is a follow up to yesterday’s post about the upcoming June 13-14 REDC auction of bank owned foreclosure homes.
Most auction houses don’t use the Arizona Association of Realtors’ (AAR) purchase contract form. They’re national corporations; they use their own forms.
REDC doesn’t publish their purchase contract online. However, I’ve seen other auction companies’ purchase contracts, and noticed that many of the buyer’s rights under the AAR contract are not in the auction contracts.
Most importantly, the AAR purchase contract gives buyers the right to cancel the purchase and receive a full earnest money refund if:
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the property doesn’t appraise for at least the purchase price
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the buyer isn’t approved for financing
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the buyer doesn’t like what s/he found during the home inspection period
Most auction houses don’t allow buyers these rights, known as “contingencies”.
Simply put, if the house doesn’t appraise for the winning bid amount, you must buy it anyway or forfeit your earnest money. Your mortgage lender denied you a loan? Oh that’s too bad. Will that be cash or cashier’s check? Oh, you don’t have the cash to buy the house? Ooooh. Well, we’re just gonna have to take your earnest money. Better luck next time.
A Great Deal?
Two tips if you’re considering attending the REDC auction on June 13:
1) Consider the cost of the marketing fee the auction house adds to your purchase price.
At the REDC auction on June 13, a 5% marketing fee is added to the winning bid. That means the house must be at least 5% below prevailing market prices before it’s worth it to have bought at the auction.
2) Do a thorough home inspection before the auction, including a contractor’s estimate for repairs and a Realtor’s or appraiser’s estimation of value.
Know exactly what you’re buying. Does the roof leak? Does the A/C work? How about the water heater? Does the house have termites? Foundation damage? Slab leaks?
The old saying “you get what you pay for” has been around long enough to get old because it’s often true.
I’ll be attending the June 14 auction. If you’d like to attend with me, call or email.
602-999-8831 or Heather@ThePhoenixAgents.com
Heather Barr is a Realtor and a happy workaholic. She eats more than someone her size ought to be able, and is a runner as a consequence. Her TiVo's full of spy thrillers, police procedurals and Whedonesque sci-fi.
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{ 3 comments… read them below or add one }
Heather,
I can not speak to a REDC auctions but I am a partner at Sheldon Good & Company, a national real estate auction firm, and we encourage buyers to bring inspectors or anyone else they want through all properties we sell before they bid at auction. In fact we require the buyer to make a representation that they have inspected the property before bidding. The only exception would be a property which is deemed unsafe for a tour or one that is occupied where the seller does not have the right to access.
REDC encourages people to schedule an inspection during the open house period, which takes place over the two weekends prior to the auctions. REDC encourages auction goers to conduct inspections in all its advertising, emails andi its print and online brochures.
Hi Rick,
Thanks for visiting us. I’m glad you made your comment, and I’m going to edit my original post to add your thoughts. I’m surprised – and very pleased – to hear that REDC would be OK with a buyer who wanted to do a home inspection during the Open House period(s). I wasn’t sure when a home inspection could be done, and would never feel comfortable advising a buyer client to purchase an As-Is home without an inspection. Good to know buyers can do their due diligence inspections while the homes are “Open” before the auction. Thanks again! Looking forward to the REDC auction. — Heather