You are currently viewing Do you know how a real estate auction works? Worth it? Find it out!

Do you know how a real estate auction works? Worth it? Find it out!

Participating in a property auction can be interesting for those who want to acquire a property for a more affordable price. However, there are several aspects that need to be considered when participating in such an event.

It is possible, yes, to find good opportunities in auctions, but it is essential to be careful and know how to evaluate what is being auctioned to avoid losses. In addition, it is the duty of the interested party to weigh and analyze the different alternatives for acquiring properties in addition to auctions.

After all, is a property auction worth it or is it better to buy a new development? Take a few minutes and see how auctions work!

What is a real estate auction?

An auction is an event in which certain objects or goods are sold. The highest bidder buys the product. There are different types of auctions, in which the following are sold: cars, real estate, artistic works, relics and antiques, imported products, among others.

Thus, when a good is auctioned, its minimum value is usually advertised. The various interested parties compete for this asset, offering higher values ​​in the search for it.

Property auctions take place in different situations. One of them is when the owner of the property faces financial difficulties and cannot afford a loan. A property can also be auctioned when it is used as a business guarantee and the person does not bear his obligations.

In these cases, the financial institution, which owns the property, takes it and sells it through an auction to get its money back. Auctions can take place at different times, but they can be more frequent in periods of economic crisis, in which many people end up with compromised financial control.

What are the types of auctions?

There are two types of auctions: judicial and extrajudicial. In the first, the property is auctioned to pay off a debt that the owner has and was collected in court. That is, the property was put up for auction by decision in a court case.

In extrajudicial, the property can be auctioned for several reasons. One of them is precisely the lack of payment of the financing made by a financial institution, or for not having paid the installments of the property purchased directly from the construction company. In this case, the institution or company takes the project as collateral.

It is important to keep in mind that a financed property does not belong to the buyer, but to the financial institution. The property becomes the property of the new owner only after the debts with the company that financed the property have been paid.

How does a property auction work?

Buying a property at auction is different from buying it directly from the owner, company or real estate agency. While in these situations you negotiate the purchase of the property and do it through a contract, at the auction you participate in a dispute with other buyers.

In addition to those interested in auctioning the properties, there is the presence of the auctioneer, who is responsible for the process. He receives the different bids and declares the property sold to the one who offered the highest value.

Bids are generally based on a minimum price, which is defined by the property valuation. If there are no interested parties, the good can be traded in another auction, with a lower minimum value.

The auction can take place in two ways: in person or online. Both works similarly. Learn more about the two options below:

On-site auction

In the on-site auction, the event takes place in a physical location and everyone must be present, both the auctioneer and interested parties. In this modality, bids must be made only in person.

Online auction

The online auction takes place entirely over the internet. Its operation is simple. In this case, the interested party can see the property through photos, have access to its description and also to additional information.

To participate, you must register online, which allows you to follow the event online. It is worth noting that, even though it is carried out online, the event has a pre-established time and date to take place. As the event progresses, the system shows the lots being auctioned and the bids that have already been placed.

The participant must pay attention to the time, as a clock counts towards the end of the auction. When a property is auctioned, the winner of the bid is instructed to make payment for the property to be released.

In addition to these two modalities, it is possible that there are also mixed auctions, in which there are bids in person and over the internet, simultaneously.

What are the advantages of a property auction?

Participating in a property auction can offer you three advantages that are worth mentioning. Check them out below:

Advantages that a real estate auction can offer. Source: Live

1. Attractive prices

For those who want to save on the purchase of development, the auction can be ideal to find opportunities. That’s because properties can be sold at prices much lower than their market value.

2. Good availability of properties

Times of economic crisis and unstable periods in the country can help increase the supply of properties of all types and sizes to be auctioned. The availability of projects, however, also happens in other circumstances. Even in stable economic periods, for example, it is possible to find good opportunities. After all, there are cases of default at these times as well.

3. Speed

After bidding for the property and making the payment, the bidder will receive instructions to receive your purchase. After a few days, therefore, the new owner of the property will be able to enjoy it.

Thus, those who want a property ready will be able to have it in much less time than if they bought a project still under construction, for example.

What are the risks of buying a property at a property auction?

Despite the advantages – and even though property can be sold for a value well below the market in an auction –, in many cases the cheap can be expensive. There are certain risks that need to be mentioned and that must be considered by buyers.

Meet three of them below:

1. Previous debts

If the interested party fails to check property expenses, such as contract debts, condominium debts and non-payment of taxes, for example, the purchase may cause the buyer to suffer losses.

2. Condition of the property

If the buyer has not verified the current condition of the property, another risk may be precisely to buy a property with several problems. In some cases, hidden defects and other damage to the property can be costly.

3. Occupation of the property

In some cases, the auctioned properties are occupied, and residents may refuse to vacate the site. This can lead to expenses with possible lawsuits, not to mention the stress this can cause.

When there are residents, buyers are unable to visit the site to check the internal conditions, which prevents the new owner from finding possible damage that would need adjustment.

In case of purchase of occupied property, residents have up to 60 days to vacate the place. If this does not happen, the new owner must resort to court proceedings.

These risks can make the deal not worth it. And that’s why, in many cases, buying a new property can be less risky and the right decision to avoid stress.

How to participate in an auction?

In general, to participate in an auction, it is essential to read the notice and check all the participation rules and conditions, such as: location, auction date and payment methods.

Most auctions these days take place online. In this case, just analyze the properties and, if you find one of interest, make the proposal – always taking into account the minimum value established for the property auction.

If the auction is in person, you must go to the place where the event will be held and make the offer. In the case of an online auction, simply access the auctioneer’s website and enter the page of the property you want to be able to place the bid.

What options are often available on the market?

Institutions that hold auctions more frequently tend to auction properties of different types: residential, urban, rural, commercial or industrial. The main auctions carried out by financial institutions are:

· Real estate auction of Caixa Econômica Federal (CEF);

· Direct Cash Sales;

· Bradesco real estate auction;

· Banco do Brasil (BB) real estate auction;

· Itaú real estate auction;

· Santander real estate auction.

4 tips for not being trapped in an auction

If you found the idea of ​​participating in a property auction interesting, check out now four tips to avoid losses when participating in one!

1. Read the notice carefully

Read the notice to know the date and time of the auction and information about the properties that will be auctioned.

If you are unable to determine if the value is suitable and if the condition of the property is good, talk to a realtor to find out if the project to be auctioned is worth it.

2. Pay cash

An auctioned property can be acquired for an affordable price if paid in cash. Financing, in this case, can increase the value because of the high interest rates, making the auctioned property cost much more than a property on the plant, for example.

So, it is worth evaluating this issue carefully. If you need financing, it may be worth considering new properties.

3. Visit the property before bidding

You went to the auctioneer’s website, read the notice, saw the auction date and found properties that might be good deals for you. After that, the correct thing would be to visit the properties to analyze them personally and check if they are in good condition.

If you wish, bring a broker, architect or engineer to give you better information about the structure.

However, keep in mind that if the property is occupied, it can be very difficult to visit. Therefore, prefer unoccupied properties, mainly to avoid stressing the residents after the eventual purchase.

4. Talk to legal experts

In these cases, relying on legal advice or the work of a legal professional to verify legal issues and even the documentation of the project can help you to identify if it is a good deal or if it will bring you problems.

So, it’s worth talking to experts before making a decision.

After all, is a real estate auction worth it?

After following the tips and precautions that should be taken in an auction, as well as weighing the risks and advantages of acquiring a property via auction, a question may arise: after all, is the property auction worth it?

The answer depends on several factors. If you’ve found the ideal property, checked its conditions, analyzed the documentation and debts involved, and have the money to pay in cash, buying it might be worth it.

On the other hand, the risks involved can make this operation disadvantageous and very stressful, making it much more worthwhile to acquire a new property, in a normal purchase and sale process.

To find out whether or not this option is right for you, review all aspects of the business before making this decision.

Questions and answers about real estate auctions

So, did you like to know a little about real estate auctions? Check out the most common questions about the subject now!

How do I know the date of auctions?

Auctions are often widely advertised. Those who want to know the date of new auctions can search the internet, public notices and newspapers of great circulation or on the websites of several courts.

Who can participate in an auction?

Any natural or legal person can participate in an auction. In the case of individuals, they must be of legal age and able to manage their assets.

According to the law, tutors, trustees, administrators, executors, trustees, liquidators, members of the Public Ministry, among others, cannot participate.

How is the property evaluated?

The value of the property is assigned by a court expert, who is appointed through an appraisal report. This assessment considers: location, state of preservation, market price, among other aspects.

What can be done if the property is occupied?

As you have seen, the law gives the person who occupies the property within 60 days to deliver it. If not, you must file a lawsuit.

Most of the properties can even be occupied. If so, there are other ways to resolve this issue.

In this case, it is necessary to ask the judge to vacate the property 10 days after the auction has been approved.

This is an Action of Imission of Possession with a deadline for eviction determined by the same judge who issued the order for a judicial auction.

On the other hand, if whoever is living in the property is a tenant, you can try to resolve the situation taking into account the lease agreement entered into previously.

Purchasing a property through a property auction can be an interesting option. However, despite the advantages, there are several risks that cannot be overlooked.

So keep in mind that, depending on the situation, the best thing to do is often buy new property. That way you can avoid future losses and problems and still get a great deal! Did you like the article? Keep learning about the subject to make the best choices when buying your new property!