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Buying Properties Below Market Value At Auction

by Bella Palmer

Buying property in auctions can be a great way for a real estate investor to acquire properties at less than the market value. However, sometimes investors who are new to the process find themselves a bit intimidated by the thought of buying auctioned properties. Fortunately, the process is not really that difficult to understand. Of course, as with all real estate transactions, there are some things that must be kept in mind when learning how to buy repossessed property, or any property, at an auction.

If you are looking to buy a BMV property, auctions are a great place to look. Below market value properties, commonly referred to as simply “BVM properties,” are frequently put up for auction. There are many different reasons why this happens. In some cases, the property may have been repossessed, and must be sold quickly. Other times, it may be simply that the property owner needs to free up funds in order to make another desirable, time-sensitive investment. Auctions are very popular with property owners who want an easy transaction as well as a quick sale. Either way, it is common to find properties offered at auctions at well below their market value.

The condition of the property must be taken into consideration when evaluating a property that is to be auctioned. In some cases, especially when an owner simply wants a quick sale, there may be very few issues to address after purchasing the property. However, especially in the case of a repossessed property, there may be a number of repairs and renovations required in order to make the property habitable again. The cost of any necessary renovations must be considered when deciding how much one is willing to pay for the property.

If you are planning to rent the property after purchasing it, it is also important to look into licensing issues. For example, transforming a single family home into several rooms which can be rented to multiple tenants can be a great way to reap a good return on your investment. However, sometimes there are licensing limitations that can prevent using a property in this manner. Understanding the licensing limitations before buying a property is the best way to avoid unfortunate and costly surprises.

As with any real estate purchase, the property’s location is another important factor to consider. A good location will help ensure that a property’s market value stays high. Location is also important if you plan to rent the property to tenants. Look for properties that are located in close proximity to transportation links and popular amenities such as stores. If you plan on using the property as student housing, make sure it is located close to a good university.

It is definitely possible to find great property deals at auctions. However, it is important to keep your overall budget in mind. Consider the condition of the property, and calculate how much you may need to invest in repairs and renovations. Decide upon a top bid, and then stay within that bid range, without getting carried away by the auction process.

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