Buying land via auction can be a great investment opportunity for the savvy investor who is looking for ranch land or farmland real estate. Knowing how the auction process works and what to expect is key, however. Here are the three most important questions to ask yourself when buying at a ranch land real estate auction.
Is The Property A Foreclosure?
Many of the properties you see listed for sale by auction are in the process of being foreclosed on. This means the owner has failed to make the required mortgage payments and the lender is trying to recoup their losses. The lender doesn't want the property, they want their money. This means the property owner still has plenty of opportunity to pay what they owe and prevent foreclosure. If you have the winning bid on a foreclosure, the sale isn't complete until the title has been transferred.
Not all properties sold at auction are foreclosures. When large acreages of ranch or farmland are sold, they are often sold at auction as well. The property may be subdivided into smaller parcels, which can be advantageous to the seller and buyer both. If the land available is adjacent to other property owners, an auction will often allow buyers to compete at a price the marketplace can bear.
Did You Do Your Due Diligence?
Properties that are not being foreclosed on will usually have a set time for prospective buyers to get a closer look at what they would be buying. If a property is occupied and is being foreclosed on, you likely will not be able to inspect it. That doesn't mean you can't do some research, though. Google Earth will allow you to zoom in on the property and get a better feel for its location, orientation, topography, land features, and outbuildings. You can also drive by the property.
If the property is something you are interested in and plan on bidding, make sure you hire a real estate attorney or title company to conduct a title search. You want assurance the owners don't have a second mortgage or lien against the property. A lien may not dissuade you from bidding but be aware these liens will become your responsibility if you win the bid and will likely lower how high you are willing to go.
Do You Have Your Financing In Place?
Most of the time, the terms of an auction require payment immediately after the sale. This means if you are not paying cash, you will need pre-approval from a lender. You should have paperwork in order from the lender before placing a bid.Share