Bob Hedgecock didn’t plan on buying his next house at auction, but that was before he saw a picture of a beautiful Lakewood property tucked away near Green Gables Country Club.
Hedgecock, who previously attended farm auctions to look at equipment and real estate, ended up buying that home and, later, several more properties via auction.
The Lakewood resident isn’t the only home shopper giving auctions a fresh look. The National Auctioneers Association reports that the live auction industry yielded roughly $270 billion in sales last year. From 2003 to 2007, residential auction sales jumped 46 percent.
Jim MacDonnell, executive managing director at Denver auction firm Sheldon Good & Co., said shoppers need to do their homework before considering a home purchase at auction.
Would-be buyers should arrive with a cashier’s check in hand — amounts vary, but 10 percent of the published opening bid is a requirement for some auction firms — and have a good sense of the property they may buy that day. That means having a home inspector examine the house and having a lawyer or Realtor review the title work.
A quality auction house will allow a minimum of 75 days before the sale is announced and the live auction begins, MacDonnell said.
Not all auctions are created equal.
Some auction firms may cancel an auction right before it’s set to start if they feel there’s not adequate interest in a property, he said. Others won’t allow enough time for potential buyers to finish their homework, experts warn.
It’s hard to gauge just how much a buyer can save through the auction process. MacDonnell said some condo auctions can net the buyer 20 percent savings from the unit’s retail price if the sale involves a big number of units.
Buyers looking for a second home or a vacation retreat can expect fewer splashy bargains, said Ric Souto, a branch broker with Slifer Smith & Frampton, a real estate brokerage in Eagle and Summit counties. That’s because mountain resort areas often have a limited supply of homes to sell.
Shay Lowe, a Realtor with Brokers Guild-Cherry Creek Ltd., warns buyers to be wary of auction houses that won’t cooperate with them.
Lowe, who teaches a class titled “Real Estate Auction Basics” every fourth Wednesday of the month, said a reputable firm “wants the information out there.”
Less credible auction houses won’t appreciate a steady flow of information, she said.
And be wary if a house is advertised as being at its previous market value, a nebulous term that could be starkly different from what it’s currently worth.
Hedgecock’s happy auction story didn’t go without a hitch. He initially bid on the house that would become his home, but the house had a reserve on it. That meant the seller had the right to refuse his, or any other, high bid. In Hedgecock’s case, the two parties ended up talking and settling their differences.
He has some simple advice for a homebuyer considering the auction route.
“Make sure you put yourself in a position where you won’t get hurt too badly,” Hedgecock said.
