A property auction is a form of intense and accelerated real estate marketing method that involves the sale of any property (residential, commercial and industrial) through an open cry competitive bidding process. It’s very engaging and will often have investors at the edge of their seats.
But the charm of an auction lies in the fact that it allows buyers access to two major benefits. First, they receive equal opportunity on a highly coveted piece of real estate alongside other interested investors. It’s no longer a duel of time on whoever gets to discover the asset first and place a down payment. Second, it makes it possible to acquire properties at a price lesser than their fair market value or if they had been sold in the market by traditional means.
That second benefit is where our discussion focuses today. You see, many people think that in order to win at auctions one has to bid the highest. That’s true to a degree because at the end of the day, the sale shall be awarded to the highest participating bidder in the room.
But this is where we beg to disagree. The highest bidder isn’t always the winner. Just because you went big doesn’t mean you’re bringing home the bacon. Sometimes, it becomes a burden on its own.
Now you’re confused. How can that be? There’s more to property auctions than meets the eye. Investors need to be wise, very wise actually. These are after all still sales only in a more heated and exciting process. It pumps out adrenaline which makes it easier to be overwhelmed.
A lot of participants, often newbies, tend to let emotions drive their transactions. This can be financially lethal for obvious reasons. For starters, one might get swept in a bidding war and acquire a real estate asset for far larger than what it is actually worth. You may have won the bid but in terms of investment you lost big time. Second of all, one might bid for far larger than what one’s financial capacity can handle. See what we mean?
What’s our point? The saying “go big or go home” does not apply to property auctions. In order to win, there are a lot of factors to consider. It’s not just about being the highest or the biggest or the fastest. It takes skill, caution, preparation and a great eye.
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