{"id":1532,"date":"2023-10-09T22:17:14","date_gmt":"2023-10-09T22:17:14","guid":{"rendered":"https:\/\/www.xome.com\/blog\/?p=1532"},"modified":"2023-11-20T22:11:57","modified_gmt":"2023-11-20T22:11:57","slug":"how-does-bidding-on-an-auction-property-work-your-guide-to-bidding-like-a-pro","status":"publish","type":"post","link":"https:\/\/cloud-prod.xome.com\/blog\/how-does-bidding-on-an-auction-property-work-your-guide-to-bidding-like-a-pro\/","title":{"rendered":"How Does Bidding on an Auction Property Work? Your Guide to Bidding Like a Pro"},"content":{"rendered":"\n

Buying a property at auction can be very exciting, but if you\u2019re just starting out as a real estate investor you might have a lot of questions about how it all works. When should you start bidding? Why is the bid going up by a certain amount each time? What happens if you get out bid at the last minute?<\/p>\n\n\n\n

Understanding the bidding process \u2014 and what you need to prepare ahead of time \u2014 is key to having a smooth experience when the auction opens up for any property you\u2019re interested in.<\/p>\n\n\n\n

Setting your auction budget<\/h2>\n\n\n\n

Going into an auction with a plan is the key. Before the auction ever begins, it\u2019s a must to do thorough research so that you can thoughtfully craft a strategy that will work with your budget and your overall real estate investment goals.<\/p>\n\n\n\n

That\u2019s where due diligence<\/strong> comes in. Due diligence<\/a> is the must-have research that you should do for any property you\u2019re interested in so that you know all the necessary information ahead of your bid. Once bidding opens and you\u2019re in the heat of the moment, you don\u2019t want to encounter any surprises on the property if you find yourself the high bidder!<\/p>\n\n\n\n

Make sure that you factor in all additional costs or fees into your total budget. This could include buyer\u2019s premiums<\/strong> (typically the greater of 5% of the winning bid or $2,500 dollars) or your earnest money deposit<\/strong> (usually 3% of the total purchase price or a minimum of $3,000).<\/p>\n\n\n\n

If you are the high bidder on an auction property, you will also be responsible for any liens or other holds that might be on the property. So make sure to review the title and any other documents available for the property and work those into your budget if necessary.<\/p>\n\n\n\n

You should also account for estimated closing costs and potential repairs or upgrades in your maximum budget for a property. Clear limits on your budget help prevent overbidding, which can be easy to do when you\u2019re caught up in an auction.<\/p>\n\n\n\n

Checking out similar properties in the area is another great way to gather information that will help you craft your minimum and maximum bids. If you know what other comparable properties are selling or renting for, then you can use those numbers to help formulate your overall budget, bidding plans, and end goals for a property of interest.<\/p>\n\n\n\n

Understanding how bids work<\/h2>\n\n\n\n

Knowing how much you\u2019re willing to bid on a property is essential \u2014 that\u2019s called your maximum bid<\/strong>. Without a solid maximum bid in mind, you might find yourself getting caught up in the auction and blowing past the top end of your budget before you\u2019ve even covered additional things like fees and closing costs.<\/p>\n\n\n\n

An auction may or may not have a reserve price<\/strong>, which is the minimum price the seller is willing to accept for a property in an auction. The seller is not required to share this amount with buyers, so you may not know what that minimum may be. But if the reserve is not met, sellers will still review the highest bid, which they may accept, decline, or send back a counteroffer.<\/p>\n\n\n\n

The minimum bid<\/strong> is the lowest amount that you can submit as a bid on a property. You may see a starting bid<\/strong> on an auction that hasn\u2019t begun yet, which is the lowest amount that can be bid to start the auction. If you want to start bidding on an auction already in progress, you\u2019ll see a current bid plus a bid increment \u2014 those two numbers added together are the minimum amount that you can bid.<\/p>\n\n\n\n

A bid increment<\/strong> is the minimum amount a bid must increase during an auction,\u202fusually a percentage of the seller\u2019s reserve price.\u202fHere\u2019s an example of how bid increments work:<\/p>\n\n\n\n

Let\u2019s say that bidding begins for a property at $20,000 and someone bids that amount. The next minimum bid amount that appears is $22,500. That means the current bid increment is $2,500.\u202fYou decide to bid that amount, making the new amount available to bid $25,000, which is another increment increase of $2,500. \u202f<\/p>\n\n\n\n

When you\u2019re in the bidding process, you can go back and forth bidding in increments, or you can also submit your best and final bid \u2014 that would be the maximum amount you are willing to bid, as long as it is higher than the current bid amount.<\/p>\n\n\n\n

Going beyond the bid<\/h2>\n\n\n\n

During the auction, don\u2019t let the excitement of the bidding process override your strategy. Pay close attention to the clock, especially in the final moments. If you\u2019re outbid in the last 5 minutes, the auction will extend 5 extra minutes so you can counteroffer.<\/p>\n\n\n\n

Staying alert and engaged throughout the process pays off, even if you get outbid. If the winning bidder fails to complete the purchase, then you may be approached at the auctioneer\u2019s discretion as the second highest bidder, or backup bidder<\/strong>, to present your high bid to the seller. <\/p>\n\n\n\n

Properties may also go through multiple auctions before they are finally sold, so don\u2019t despair. You may have another chance to bid on a property you like in another auction!<\/p>\n\n\n\n

With the right bidding strategy and budget, you can bid confidently on your first \u2014 or next \u2014 auction property. Be prepared, stay focused, and don\u2019t forget to enjoy the process!<\/p>\n\n\n\n

Ready to try bidding on your first auction? Visit Xome today<\/a> and browse available auctions to find your perfect investment property!<\/p>\n\n\n\n

<\/div>\n\n\n\n

Real estate investing involves risks. Results may vary.<\/strong><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Buying a property at auction can be very exciting, but if you\u2019re just starting out as a real estate investor you might have a lot of questions about how it all works. When should you start bidding? Why is the bid going up by a certain amount each time? What happens if you get out […]<\/p>\n","protected":false},"author":2,"featured_media":1535,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[16,63,12,13],"class_list":["post-1532","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-property-auctions","tag-bidding","tag-due-diligence","tag-home-auction","tag-property-auction"],"yoast_head":"\nHow Does Bidding on an Auction Property Work? - Xome | Blog<\/title>\n<meta name=\"description\" content=\"Get the confidence you need to bid in your first real estate auction. 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