Due Diligence on an Occupied Property
Many properties are occupied by former owners or tenants so be sure to check the property details page to learn as much as you can about the home. You can still do your due diligence with the exception of seeing the inside of the property. You can drive by the outside to take photos and observe the neighborhood. You may also want to research the schools and crime rate. But please do not disturb the occupants or trespass on the property.
If the occupants are tenants, it may be possible to continue to rent to them. But if you want to flip the property or live in it yourself, you may want to research eviction laws – just so you are informed in case you need to go that route.
Conducting Due Diligence
Conducting due diligence is one of the most important steps you can take before buying a property. It’s like doing your homework before a final exam. And, similar to homework, your success depends on it. Here are the most vital steps to take before placing a bid.
Review property details page. This is the page where you register to bid on a property. It contains valuable information such as photos, interior inspection reports (if applicable), title insurance information, tax information and other important information.
Find out what the home is worth
- Are you going to buy and flip? If so, you need to know what similar homes sell for in the area. You can go on sites such as Zillow.com, research recent sales online or contact a real estate agent. You will also need to know how much it will cost to renovate the property, which may be tricky if the home is occupied. But you can drive by and see if it needs a new roof, paint, etc. You should plan on making cosmetic repairs like replacing the carpet/floors, upgrading appliances and painting the interior. You can call a contractor to get a ballpark figure or do your own research.
- Are you going to buy and hold? If you plan to buy the property and hold it as a rental, you will need to know the market rents and rental vacancy rate. Regardless of whether you plan to rent the home or live in it, you will still want to know what comparable sales are, although it’s not as urgent because the market conditions may change by the time you are ready to sell. You will, however, need to know the renovation costs. You can reach out to a contractor to get a ballpark figure or do your own research.
Can you finance or do you need cash?
- Many properties are sold on a “Cash Only” basis. The reason being is that many lenders are not willing to provide mortgages on occupied properties because the interior cannot be inspected. If you find a property that is financeable, you will need to provide your loan pre-approval letter. Check the property details page to find out if your property is financeable or requires an all-cash purchase.
- Regardless of whether you finance or buy with cash, you will need to show Proof of Funds within 24 hours of winning the bid. If you finance, your Proof of Funds must be enough to cover both your Earnest Money Deposit and down payment. Proof of funds include bank statements, brokerage accounts, a line of credit or any funds that are immediately available.
Review title reports
- We provide preliminary title reports on many of our properties. The reports can be found on the property details page. Please note that these reports are informational only, which is why we recommend obtaining a full title report.
- To purchase a full title report, contact a title company. A real estate agent can also recommend a title company. A full title report will show you exactly what’s on the title and will indicate if there are any liens for items like unpaid taxes or homeowner association dues. This is important to know before you place a bid.
Investigate the property and surrounding neighborhood
- This step is of the utmost importance since buying a property involves a significant investment. Many of the homes on Auction.com are occupied by former owners or tenants so you will not be able to access the property. But there are still ways to investigate. You can drive by and take photos of the outside of the home and checkout the neighborhood. Do not disturb the occupants or trespass on the property. Please note: All inspections and investigations need to be done prior to the auction.
- If the property is vacant and interior inspections are permitted, you can hire a home inspector to assess it. The property details page will have an icon under the bid box that says “Interior Access Available.” You can ask an agent to recommend an inspector or you can find one through a national association such as: ASHI and InterNACHI.
Broker and Agent Participation
Real estate brokers and agents are welcome to participate with Auction.com. Commissions are offered on some properties. You can search the site to find properties that offer commissions or check the property details page. Even if a commission isn’t offered, some agents will work with you in anticipation of earning a commission later when you sell or rent the home. If you would like to use an agent, follow these steps:
- Register to bid on the properties that interest you and add your agent’s information
- Make sure your agent registers separately for those same properties
- Inform agents that they do not have bidding privileges
Interior Access Available
On select properties, interior access is allowed. Contact the agent on the property details page to gain access. If an agent is not listed, contact a licensed agent of your choosing and have the agent call the number on the page. Licensed agents will be required to provide their real estate credentials before they can show you the property.