Should I Buy A Home From An Auction?

The traditional channels of searching real estate listings and working with real estate agents aren't the only way to acquire

a property. Experienced real estate investors often purchase properties at auctions. But auctions aren't limited to professionals – novices have purchased their homes at auctions, too.

How Do Properties End Up at Auction?

The two main types of property auctions are foreclosure auctions and tax lien auctions. Before a property reaches this stage, several things have to happen.
First, the homeowner has to have not paid his mortgage for several months. Then, the bank files a notice of default with the county recorder. If the homeowner doesn't pay the balance owed or renegotiate the loan with the lender, the home can be put up for auction. The amount of time it takes from when the homeowner stops paying the mortgage to when the home ends up at auction varies, but can be anywhere from a few months to a year or more.

The other main way a home ends up at auction is when the owner doesn't pay property taxes or becomes severely delinquent on state or local income taxes. In these cases, it is the unpaid tax authority (not the bank) that seizes the property.

How Property Auctions Work 

Auctions take place at local government courthouses and other locations chosen by auction companies, such as hotel conference rooms. Homes are also auctioned online. Foreclosure auctions are held by bank-hired trustees. Tax lien auctions are conducted by local sheriffs.

Winning a property at these auctions can work in two different ways. In a lender confirmation auction, the lender doesn't have to accept your offer even if you are the highest bidder. In an absolute auction, the winning bid gets the property.

The starting price of the auction may be the balance remaining on the mortgage or may be a lower amount designed to spur bidding. In the case of a foreclosure auction, the lender is not allowed to profit from the auction. Often, these properties are sold at a loss, but if there is a profit, it is supposed to go the homeowner after the mortgage, and any other liens are paid.

What can potential bidders learn about auction properties before bidding? Some auction companies have open houses so potential bidders can walk through the properties ahead of time. Listings describing the properties to be auctioned are also available. Other times it is only possible to drive by and see the outside. To discover properties that will be auctioned off, potential buyers can check county recorder websites and foreclosure listing services.

As for payment, bidders should bring to the auction a cashier's check for the amount of money required by the auction holder. Winning bidders will pay any auction fees and/or bidding fees and put down an earnest money deposit on the property they are purchasing before leaving the auction site. The winners then go through escrow and closing just like with any other home purchase. Bidders at property auctions are often real estate investors who can afford to pay cash, but for auctions that allow financed purchases, it is best to get prequalified ahead of time.

Some auction houses prefer that you work with their affiliated lenders and will have those lenders on site at the auction. However, do your research beforehand, using a tool like a mortgage calculator to determine the interest rates available from competing lenders. This may give you some leverage when working with a bidder's lenders.

Benefits

Why would anyone be interested in buying a property at auction? For one thing, an auction offers a first chance to snap up a type of property you might not otherwise be able to afford. Because of the extra risk involved and because fewer people may be interested in the property than if it were available through traditional channels, prices can be lower. Auction properties aren't always great deals – the auctioneer could set a hidden reserve price on it, the minimum you must bid – but the potential to get a luxe residence at "fire sale prices" is such a big draw that, for many people, it compensates for the numerous potential drawbacks.

Drawbacks

Properties being auctioned off aren't necessarily hidden gems. If a property winds up at auction, it means the owner was having financial trouble, so the house may have deferred maintenance problems. It might even be completely trashed. Also, there may be claims against the home – not just the aforementioned tax liens, but contractor liens or a second mortgage. Bidders can avoid this problem by checking with the auction house to ensure that the property has clear titles.

Buying a property at auction often requires a lot of cash. Each auction company/county government has its own requirements for payment, but you will probably need some amount of ready money just to secure your bid. Down payment amounts and methods of purchasing often depend on the property and the auction house. More flexible financing options may be available by purchasing a bank-owned property the traditional way, instead of at an auction.

Auction properties sometimes do not allow for a home inspection or even provide a view of the inside prior to the auction. If you can't afford the risk of buying a property in poor condition, stick with auctions that allow you to inspect the property before bidding. Without this information, it can be hard to know what you're getting into, what a property's repair costs will be, or the true value of property until you've become the owner.

Also, in some cases, the (former) owner or a squatter will be occupying the property, meaning you will have to evict them – a process that can be unpleasant at best, and lengthy and expensive at worst. 

The Bottom Line

If you're interested in trying to pick up a bargain property at auction, there's a lot to learn. Auctions can be a riskier way to purchase a property than buying a property through a real estate agent, so it's important to be extremely well-educated about the process and about the properties you are interested in bidding on.

Foreclosed homes may be financially appealing, but there are many obstacles to consider before buying.  Also, just because a home is for sale at auction doesn't mean that you'll be able to get it at a good price (or that the home is a good deal at any price – it could be a money pit!). 

Also buyer beware not all auction sites are the same.  One review on Trulia.com warned about Auction.com.   Here is what the reviewer wrote from his experience.


"Jim Breunig, Home Buyer, Pittsburgh, PA
Fri Dec 27, 2013
Let me start by saying that I am a flipper, and have purchased many foreclosed home through just about every way imaginable. Please, please stay away from bidding on Auction.com. I recently participated in one of their online auction. This is the worst "platform", or process of any online real estate auctions. I was the "Winning Bidder", 12/7/13 which translated in English means nothing. I complied with their ridiculous terms and conditions (Please Read Terms Fully) Sent my earnest money within the required time frame to Service Link (Closing Co) located in Pennsylvania, (I'm in Florida). After that I heard nothing. I had to place a call once a week to auction.com and got the standard runaround mushmouth BS congratulating me on being the winning bidder for three weeks, to which I requested a signed sellers acceptance... the response, let me check on that. Bid pending, was the answer. Now after 3 weeks have gone by, I get an email and a call letting me know my offer was rejected. Fine, I can accept that, it was a pretty low bid, so I ask for an estimated time frame in which I can expect my earnest money to be returned. This is when the real fun starts, 6 emails later and being informed that Auction.com has nothing to do with the return of my earnest money ($2500.00) I am shoved off to try and collect it myself from Service Link, Which has yet to respond. The moral of the story, deal local, if you don't bid on auction.com, or if the bid doesn't reach about 90% of market value it will revert back to the original list agent. Wait, and deal with a local Real Estate Agent and Title Company. Don't waste your time, or put yourself through the stress and aggravation. I have purchased other properties online through Williams and Williams and Hubzu, both closed successfully and without issue and their communication was significantly better than auction.com. I will post a follow up with how long the wait will be to get my earnest money returned."

Inventory Remains Low More Homes Needed To Satisfy Buyers

Existing-home sales declined for the second consecutive month in January and last month’s decrease was the sharpest in three years.

Total existing-home sales slumped by 3.2% in January to a seasonally adjusted annual rate of 5.38 million, according to the National Association of Realtors.  The annual rate during December 2017 was 5.56 million.

Sales are down by 4.8% compared to this time a year ago, which is the lowest annual drop since August 2014.

Once again, low inventory is at the forefront of the market’s problems. Housing inventory actually increased by 4.1% last month to 1.52 million existing homes available for sale. Good news, right? Sort of. Inventory is still 9.5% lower than a year ago and has fallen year-over-year for 32 consecutive months, according to the NAR. Unsold inventory is at a 3.4-month supply at the current sales pace.

NAR chief economist Lawrence Yun believes the market desperately needs a correction from a supply standpoint to

satisfy rampant buyer demand.

“While the good news is that Realtors® in most areas are saying buyer traffic is even stronger than the beginning of last year, sales failed to follow course and far lagged last January’s pace,” Yun said. “It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.”

The good news for agents and sellers is that prices increased for the 71st consecutive month. The median existing-home price in January was $240,500, up 5.8% from January 2017.

Agents can seriously control the market by accumulating a sufficient inventory of listings. Not only can you grow your network by connecting with sellers and buyers, you’ll put yourself in a prime position to cash in on the current market conditions. Until supply meets demand, housing prices should continue to rise.

Continued Low Inventory Means Sellers Are Getting More For Their Home

The real estate market has pretty much remained the same since the last quarter of 2017.  In most areas it is still a seller's market.  

The number of homes for sale continued to drop and prices

climbed back to pre-recession levels. 2018 looks to be another strong seller’s market as prices continue to increase as they have, month-over-month, since early 2012.

In December, the number of new listings in the county fell by nearly 600 homes compared to November, according to Realcomp. There were 1,510 new listings in November while December dropped to 941 homes.

Median prices and inventory decreased compared to November. Homes sold during December averaged $248,950, up from $238,450. Inventory dropped 400 homes from November.

2017 was an extremely good year for all metro Detroit residential property values. As we continue to have a low supply of homes on the market, values continue to rise. Many areas are now back to their pre great recession levels.

2018 could very well remain a strong seller’s market as inventory drops, selling prices increase and interest rates remain low.

The story in 2017 continued to be sale prices and inventory. Sale prices were up 9.4 percent over 2016 and 38.9 percent over the last four years. The one downfall with home values increasing rapidly with inventory so low, it’s been harder to appraise homes.

This challenge is due to the fact that because of the lack of inventory, buyers are willing to pay more in competitive situations.

The problem comes when a buyer is willing to pay more for your home but you can’t sell it for more because there are no other homes to compare it to.

December 2017

• New Listings: 941 (- 11.7 percent from 2016)

• Pending Sales: 881 (- 1.8 percent from 2016)

• Closed sales: 1,252 (- 6.4 percent from 2016)

• Days on Market Until Sale: 38 (- 5 percent from 2016)

• Median Sales Price: $248,950 (+ 12.8 percent from 2016)

• Average Sales Price: $288,937 (+ 6.6 percent from 2016)

• Percent of list price received: 97.9 percent (+ 0.9 percent from 2016)

• Inventory of Homes for Sale: 3,103 (- 29 percent from 2016)

• Months Supply of Inventory: 2.1 (-30 percent from 2016)


December 2016

• New Listings: 1,066

• Pending Sales: 897

• Closed sales: 1,337

• Days on Market Until Sale: 40

• Median Sales Price: $220,750

• Average Sales Price: $271,079

• Percent of list price received: 97 percent

• Inventory of Homes for Sale: 4,372

• Months Supply of Inventory: 3

OAKLAND COUNTY DECEMBER HOUSING MARKET: http://gmaronline.com/documents/stats/17.12_Oakland.pdf

OAKLAND COUNTY NOVEMBER HOUSING MARKET: http://gmaronline.com/documents/stats/17.11_Oakland.pdf

SOUTHEAST MICHIGAN HOUSING MARKET 2017 SUMMARY: http://gmaronline.com/documents/stats/18_YearEnd.pdf

Ronald Dwyer is a licensed Realtor serving: Troy, Rochester, Rochester Hills, Birmingham, Bloomfield Hills, Bloomfield Township, Sterling Heights, Shelby Township, Livonia, Novi, Livonia, Canton, Plymouth, Dearborn, Dearborn Heights, Redford and all Southeastern Michigan 

10 Things Never to Put Down Your Garbage Disposal

Chicken Skin Should Never Go Into The Garbage Disposal

Oil and Grease

While your garbage disposal can handle liquid or semi-solid fat, grease, and oil, the rest of your home’s plumbing system cannot. Instead, throw the greasy stuff out with the trash; seal liquid oil and grease in a can or jar first. 

Pasta and Rice
Delicious on your plate, but a problem in your plumbing, both pasta and rice continue to swell with water, even after cooking. Toss them in the trash unless you’re willing to risk a clog.

Bones, Fruit Pits, and Seafood Shells

Even though very small bones will probably pass through without a problem, it’s safest to keep all bones, fruit pits, and seafood shells out of your garbage disposal. These hard items can break your disposal or clog up your plumbing. 

Medication

Tossing your unused medications down the garbage disposal might seem like a smart way to dispose of controlled substances, but putting drugs into the plumbing system can eventually impact the water supply. Instead, the FDA recommends removing the drugs from their packaging, putting them in a plastic bag with something unappealing like dirt or cat litter, then disposing of the bag in the trash.

Fibrous Vegetables
While most vegetables can safely pass through the garbage disposal, fibrous veggies, including artichoke, celery, rhubarb, lettuce, kale, cornhusks, onion skins, asparagus, and chard tend to tangle around the disposal’s blades. Add these to your compost heap instead, or toss them in the trash. 

Potato Peels
It’s convenient to peel spuds over the kitchen sink, but don’t send those peels down the drain. Potato peels turn into a gluey mass inside your plumbing pipes, and pose a major clog risk.

 Broken Glass or Metal

If metal or glass fall into your garbage disposal, don’t turn it on. Instead, switch off the disposal at the unit under the sink, then try to fish out the offending item with a fork, grabber, or hook. If that's not possible, put on gloves to protect your hands and carefully retrieve the item. Always make sure the garbage disposal is completely turned off before attempting to retrieve an item from the sink.

Produce Stickers Can Damage Your Disposal

Coffee Grounds and Eggshells

There’s some dispute about whether or not eggshells and coffee grounds are safe for the garbage disposal, but why take a chance? Instead, add them to your compost pile, mix them around your outdoor potted plants to add nutrients, or dispose of them in the trash. 

Chicken Skin

Go ahead and reduce your fat intake by removing chicken skin before cooking, but don’t toss that skin down your garbage disposal. It can easily clog your plumbing, and brings unnecessary germs and stink to your sink.

Produce Stickers
It’s fine to put citrus, apple, or banana peels into the garbage disposal, but be sure to remove any produce stickers before you do. Stickers are likely to stick to the disposal blades or the inside of your pipes. 

Don't get scammed: Experts offers tips for preparing your furnace for winter

The season for furnace scams is heating up as temperatures drop.

State regulators and consumer advocates are reminding home owners to do their research before forking over money for furnace cleaning, repairs and replacements.

“We get an increase in complaints this time of year about heating contractors that offer everything from duct cleaning to furnaces inspections,” said Phil Catlett, president of the Better Business Bureau serving West Michigan. “Most are reputable and competent, there are those out there that aren’t and they may try to frighten consumers into unnecessary

purchases or repairs.”

Many home owners don’t understand what heating work involves, and expenses can run from less than $100 to several thousand dollars, so it’s easy for contractors to take advantage of some people, said Steven Hilfinger, director of Michigan’s Department of Licensing and Regulatory Affairs.

Mechanical contractors must be licensed with the state. Consumers can verify whether a business has the proper licensing by checking online or calling the Bureau of Construction Codes Mechanical Division at (517) 241-9325.

Customers also should ensure that a company is insured for liability and property damage.

Typically, if there have been problems with a company not following through on promises or duping customers, it will show up on the Better Business Bureau website. The BBB can perform an investigation if someone requests one.

Company longevity is another thing to consider, said Gary Schultz, who started Aspen One Hour Heating & Cooling in Jackson in 1981.

“If you’re going to make a large purchase, look at their website, look at who they are,” he said.

Schultz recommends getting a furnace safety check every year. His company is offering the service for $79.

There are varying opinions on the need for such services.

“Think of it a bit like your car. Both of them are potentially dangerous if they’re not running well, so by having an annual checkup you reduce the likelihood that there might be some dangerous issue,” said the BBB’s Catlett. “On the other hand, if money is tight, I don’t think there is any absolute that you need to have somebody come and inspect your furnace every year.”

Catlett recommends getting at least two or three estimates before having your furnace serviced or replaced.

If it’s urgent and there’s no time for three estimates, then ask for references from friends and family or check with the BBB, he said.

Home owners should consider replacing their furnace if it is more than 15 years old, according to Energy Star, a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy.

A new furnace can cost up to several thousand dollars, but replacing old heating and cooling equipment with more energy efficient equipment can save some home owners nearly $200 on their annual energy bills, according to Energy Star.

Here are some more tips, courtesy of the Department of Licensing and Regulatory Affairs:

• Clean your furnace’s air returns with a household vacuum cleaner. Check the filter once a month and replace it if necessary to maintain efficiency and prolong the life of the furnace.

• Get your furnace thoroughly cleaned by a reputable, licensed mechanical contractor at least every two years. Beware of duct cleaning scams, where companies use cheap, low-quality vacuums.

• Check the warranty to see whether it covers any repairs or replacements. Many systems come with long-term warranties.

• Seek a contractor that offers warranties covering equipment, materials and labor, and offers maintenance and service after installation and after warranties have expired.

• Don’t do business with door-to-door salespeople and don’t fall for telephone solicitations that offer “low-cost” or “free” furnace cleaning. Once inside, the worker may tell the home owner their heating system has serious problems that require immediate attention. Get a written description of the suggested work and seek additional opinions.

• Be aware of scare tactics leading you to believe your existing furnace is dangerous. Don’t sign a contract just because the worker says you’re at risk of possible illness or death if the furnace isn’t replaced immediately. Ask for a written copy of the technician’s test results and call your local utility company to come and inspect your system.

Existing-Home Sales Ascend in October

The housing market hasn’t shown much growth in 2017 as recurring inventory issues continue to plague the industry. But the latest existing-home sales report from the National Association of Realtors offers a bit of encouragement for agents and consumers.

Total existing-home sales increased by 2% to a seasonally adjusted annual rate of 5.48 million during the month of October, the NAR reports. It’s the second consecutive month of market improvement after existing-home sales increased by 0.7% in September after three straight months of regression.

NAR chief economist Lawrence Yun believes employment growth has supplied buyers with plenty of confidence that now is the right time to purchase a home.

“Job growth in most of the country continues to carry on at a robust level and is starting to slowly push up wages, which is in turn giving households added assurance that now is a good time to buy a home,” Yun said.

“While the housing market gained a little more momentum last month, sales are still below year ago levels because low inventory is limiting choices for prospective buyers and keeping price growth elevated.”

The progress is exciting as 2017 concludes and the NAR reports sales are at their strongest pace since June. However, transactions are still are 0.9% below the pace set in 2016.

Low inventory has once again played a role in the market’s behavior. Total housing inventory dropped by 3.2% to 1.8 million existing-homes for sale by the end of October, according to the NAR. The inventory level is currently 10.4% lower than it was a year ago.

Scarcity continues to play a role in the price of homes that were actually sold. The median existing-home price for all housing types was $247,000, which is 5.5% higher than the median sales price last October. That marks the 68th consecutive month of year-over-year gains in median home prices.

The sales pace remained unchanged from September to October. Homes remained on the market for an average of 34 days last month, per the NAR. The average home stayed on the market for 41 days in October 2016.

The housing climate is advantageous for sellers and might be a bit more arduous for buyers trying to find the right home for the ideal price. Inventory is low to begin with and the houses that go to market aren’t available for long and aren’t going for cheap.

What Will It Cost To Add A Garage To Your Home?

When it comes to building a garage, like any large-scale building project, a lot of factors affect the scope and total price. While garage construction costs vary greatly depending on the structure's style, size, materials, and features, most homeowners spend about $25,652 to build an average sized two-car garage. You will most likely spend in the range of $16,799 and $37,091, but that will depend on many factors.


Attached vs. Detached

Putting on an attached garage is more common and tends to be more affordable. Attached garages are building off of an existing structure, and can utilize that as a wall, which cuts down on the average cost to build. It is also less expensive if the driveway is already in place. For a detached garage, the construction costs go up because it's building from scratch. However, these tend to offer more options, like a bigger work space. Here are some other factors to consider when choosing an attached or detached garage.



Attached

Attached garages are considered the less expensive option of the two. It’s easier to build three walls rather than whole new structure. You can have either an open plan (no walls, just a roof), or you can enclose the whole space with walls. They can also be a good place to store fridges, freezers and other secondary supplies. The best benefit of this garage is keeping out of inclement weather. By having an entryway from your home to the garage, you avoid snow, rain or other bad weather as you get into your car.



For a single car attached garage, you’ll pay between $7,500 and $10,000. Two car styles will be between $20,000 and $27,000, depending on materials. You’ll also have to pay electricians, painters and carpenters depending on how complex your structure is. The cost of materials could range anywhere around $40 per square foot or $5,000 to $7,000. This does not include the cost of hiring a contractor or paying for building permits. You will need to consult with several professionals and your local municipality for the best cost.



Detached

Detached garages are more expensive than attached, but they can be beneficial for the cost. If you don’t have room next to an entryway, you can build a detached garage behind the house or in a space that can fit one. These are also safer because you won’t get any carbon monoxide coming in to your house. You can also make the detached garage a secondary living space, if you add a loft space above it. While it costs more to start from scratch, you can see a lot of long-term benefits and ROI.

Costs & Considerations

The cost of a detached garage is between $9,000 and $12,000, since you have to start from the ground up. If you add electrical, plumbing or HVAC capabilities, the price will jump to around $14,000. It will be even more expensive if you add a living space above, potentially $18,000 to $20,000. The DIY cost of building a simple detached garage will be around $4,000 in materials, though you would still pay extra for electrical or plumbing. Factor in about $100 for a permit and then check with electricians & plumbers for their average prices.