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Investments

5 secrets to winning online property auctions

Place your bets … with knowledge

Online auctions are growing in popularity.

Websites like auction.com are killing it; making bundles of money selling houses online, while giving investors a whole new world for buying properties.

Its attractiveness will only grow and, more and more, people are looking to cash in on the opportunity.

So what are some of the strategies first time investors must have in order to win at online auctions? And no, we aren't talking about "just place the higest bid," but rather "winning" in terms of having a robust strategy.

HousingWire asked Rick Sharga of auction.com to list the 5 secrets to successfully buying houses at an online auction:

1. Have an investment strategy before the auction

Are you looking to buy and flip, or buy, hold and rent? Do you want multiple, lower-priced properties, or fewer, more expensive homes? Can you handle extensive repairs, or do you need properties that only require cosmetic touch ups? Do you want properties nearby, or are you comfortable owning and managing from a distance? Having a strategy in advance increases the likelihood that you'll be successful not just winning bids – but buying exactly the right properties to meet your objectives.

2. Do your homework

Even though you can make your purchase without leaving your desk, you should do as much due diligence as possible in advance of the sale. Most auction sales are as/is, with no contingencies, and no recourse if the property doesn't meet your expectations. Check out the property as thoroughly as possible, and check out the conditions of the neighborhood and local housing market. Are home prices rising or falling? How about rental rates? What's the unemployment rate and demographic profile? You can't have too much information.

3. Have your financing in place

Many online auction properties require cash or a cashier's check. Some allow for financing, but you'll usually have a very short window to get the funds delivered to the seller. Generally, a deposit is required to participate in an auction, and an earnest money deposit is needed if yours is the winning bid. Without the capital you need to finish the purchase, you could win the bid, but lose the deal…along with your deposit.

4. Know your price – and stick to it

Getting caught up in the excitement of bidding is one of the most fun aspects of any auction. Getting so caught up in a bidding war that you pay much more for an asset than it's worth isn't nearly as much fun. Successful auction winners have the knowledge needed to bid up to the right price and the self-discipline to stop when the price gets too rich.

5. Watch the bidding — especially at the end of the auction:

Online auctions are like live auctions in that the bid is never final until the gavel comes down (virtually, in this case). Many experienced bidders wait until the last second (literally, in this case) to swoop in and win the deal. Sites like auction.com will extend the bidding period any time someone comes in and submits a higher bid at the end of the auction, so you'll have a chance to counter. But you need to make sure you're online to the very end to protect your bid if you really want to win the property.

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