Auctioned properties might not be bargains

Some people have noticed an increase in the number of homes being sold at auction and are considering investigating this as a means to find the right home at a bargain price.

How do you determine the risks involved, and will you really save money by buying a home this way?

Buyers who purchase property at an auction must do their homework.

This requires rigorous market research regarding the value of the property and determining if indeed the property can be purchased at a discounted price.

Auctions are an effective way to sell property, and if planned and advertised correctly, they can bring the highest selling price. You must understand the true condition of the property and the costs of acquisition.

In addition to the purchase price, buyers are responsible for settlement costs and the premium payment to the auctioneer as a fee for selling the property.

The biggest pitfall for buyers is lack of understanding of the physical condition of the property. Generally, auctioneers will have a property-inspection report available; however, this report is only a starting point and you should conduct your own inspection to evaluate the property and determine the condition and cost of possible repairs.

Financing is also a critical component. Auctions usually require that the closing take place within 30 days. This is a much shorter period than traditional mortgage financing. Financing needs to be in place to meet the terms of the auction purchase agreement. If it is not, your deposit may be lost.

Many auctioneers have buyers' or bidders' information kits and property data on their Web sites. Reviewing these materials will be helpful. Auction processes and requirements vary around the country.

— Thomas Musil, McClatchy-Tribune News Service