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Many home hunters know what they want – a scenic view highlighting the peaks and valleys of the Texas Hill Country, or the idyllic calm that comes from views of Lake Austin or Lady Bird Lake. But the detail often stops there, as property buyers often place a higher intrinsic value on the luxury property lifestyle over where the property is. Many buyers tell us they want the vacation property they can get at a good deal. But the deal sometimes can overshadow the true value of a property to its new owners.
Potential buyers should ask themselves this: is it worth it to get a great deal on a luxury home at a place you may have never been or that you aren’t sure how often you’ll break away to?
The majority of buyers who purchase second properties spend three to five years vacationing in the market they are considering, becoming familiar with not only the niche areas within the city but the vibrancy of the community itself. Their neighbors, whether next door or passing by at local establishments, and the access to culture, arts and activities help create a sense of heart for the home. A second home can be a utopia; while what you pay is important, you want to make sure that your head and heart are there long term.
The utopia doesn’t have to be a flight or train ride away. The majority of second home buyers purchase property within two to three hours of their primary residence – close enough to get away from their everyday life and have an escape that they can use often. Frequently buyers from the Dallas and Houston areas enjoy the more relaxed Austin lifestyle.
Think about how you will use the luxury home on an ongoing basis. Where have you been? What feelings did those stays evoke? How long have you stayed there? Could you see yourself staying there for 30 days a year, 60 days or forever?
Know the Market
Successful buyers know that ongoing research reaps big rewards in second home buying. Many buyers at auction have been looking at a property in the subject market for years. The hunt doesn’t have to be complicated, regular searches using web resources and connecting with a local real estate agent in the target market can be helpful in determining true value for a property that piques your interest.
Going it alone means knowing where to look. Using established property sites like Zillow, which organizes sale listings, tax assessments and other property details for up to 10 years, can help a potential buyer understand the market.
It’s important, though, to find and talk regularly with a local real estate agent who is well versed in reading market trends. This is especially true if a buyer doesn’t have an immediate deadline for purchasing a property. Allow us to help you establish a relationship with a local agent, first by introducing what you’re looking for.
This criteria starts with your search area but includes your must-haves: views, size of the property, interests within the area. Ask them to set you up on new properties in the market that meet your criteria. More importantly, ask them to send you the sold information on a periodic basis. This will give you a feel for what the market is doing, how many properties have been coming to market, how many are being purchased, what types of prices are other’s paying.
This will help you determine market absorption, or how much activity there is in an area at a given time. Whether an area is considered a seller’s (rate of five months or less) or buyer’s market (six months or more) can help you decide the property’s real-time value, and whether you are getting a true deal when it’s time to bid at Auction.
The real estate auction event itself may come quickly and unexpectedly. What happens when a property you’ve had interest in or you think you have interest in is now going to auction? You have a fast decision to make – the property is typically going to be sold in four weeks.
Considering Auction: Have You Seen the Property
In researching your market, you’ve likely seen the property in question listed or in good circumstances, at least driven by it. Even better is a walk-through of the property. More often than not, though, property hunters haven’t seen a property that is going to auction because the previous listing price was higher than their price range, and anything outside would have been wishful dreaming.
Now that a dream can become reality, it’s time to get on and inside the property. Arrange to visit the property within two weeks. Nothing replaces going firsthand to see the property and its surroundings. We know; before David Ackel Auctions brings a luxury home to market, a senior member of our team has made a personal visit and inspection.
A personal visit can also help marry reality with the descriptions and images you’ve already seen in conducting your research. The best and most reputable companies and agents in the luxury home market – including David Ackel Auctions – use professional photographers to photograph the properties’ assets. These properties look fantastic on the web and in print but can’t show the multi- dimensional beauty of a home.
Nothing can replace a personal visit in your decision process – it can solidify whether your head and heart are ready to move at the auction block.
At Auction: Terms and Conditions of Sale
Buying property at auction is unlike any other real estate transaction you’ve participated with. Just as luxury properties are unique in their features, they are precise in their terms and conditions. Because an auction unlike any way you’ve purchased property before, reading and understanding the terms and conditions of the sale is important.
What you will typically find?
- A description of the auction format: acquiring a property through an absolute auction means the property goes to the highest bidder, without regard to the bid amount. That differs from an auction that employs a reserve, or price below which it will not be sold, or one that includes an unpublished reserve amount.
- Details on the rules of the auction, which could include registering for the auction, methods of bidding and oral contracts, and methods of payment delivery, among others. In the rules of the auction, you’ll often find the basics: the type of auction, a detailed description of the property, the auction start and end times, and any potential liability, such as a deposit, should a bid not go to contract.
It’s important to look here for details that will arise before and during the auction such as:
- The sale is most likely a cash transaction, which means financing is not a contingency;
- Closing is typically within 30 days from the auction date;
- A cashier’s check or escrow deposit is required to get a bidder card;
- How to obtain a copy of the auction day purchase and sale contract, if it hasn’t been included in previous discussions;
- A description of the property itself. This might seem like a no-brainer, but it needs to be stated. Many properties that go to auction are sold “as-is,” meaning negotiating changes to the property has little to no chance of progressing into the terms of the sale;
- Property sold “as-is” can include the home’s furnishings and structures outside of the residential structure; the terms and conditions outline these in detail.
Remember This Is An Auction
Remember reading that this isn’t your typical real estate transaction? Knowing the terms and conditions gives you a look at the expectations at auction and could leave you with one or two reactions: “Let’s get in and figure out my game plan,” or “Oh my goodness, I need to run for the hills.” That is, assuming the hills aren’t where you are looking for your next home.
In a regular home transaction, a set of coaches would draw up your game plan. An agent or attorney would write up an offer, typically containing contingencies like financing, home inspections, surveys, a review of home, Owners association agreements, and so on. Those coaches are able to help generate a game plan for auctioned properties, but only by taking greater planning measures.
Start by determining what concerns you most when purchasing a property. Most second-home buyers can prioritize needs – for example, do you place value on conducting a home inspection? While some auction properties have had a preliminary inspection completed, some potential buyers will hire their own inspector, while some don’t. It’s a personal choice, but one that must come before the auction date.
Your opportunity for any diligence you want to complete is prior to the auctioneer’s first call for bids. To put it frankly, once the auction starts, your only input is raising your paddle on what you are willing to spend for the property.
Due Diligence Completed, Now What?
With auction day fast approaching and new found confidence in the property after conducting what due diligence makes you comfortable, you are ready to purchase the property. Next up: Developing an auction strategy.
This is where the yin and yang effect really takes hold. Many home auctions feature incentives in exchange for opening bids. You may openly dismiss the options, writing them off as not worth it in an effort to purchase the property as cheaply as possible. Keep the following in mind while making this personal choice:
- You are not going to buy the house for $1.
- Take a careful look at the incentives. Are the discounts being offered for opening bids at a level that there is no doubt in your mind the house will sell? Is it a number you are happy with if you own the property for that price? (Remember your homework on learning the market.)
Success Comes With Discipline
You have done all of your homework. You know the market. You know the community. You have decided what you are willing to pay for the property. The only thing left is to exercise discipline in strategizing and sticking to those well-devised plans, especially when the heat of the auction gets you steamed to raise the paddle.
Bidding can be painstakingly slow and sometimes head-spinning as you glance at your top bids and wonder what will come next. Whether you are an aggressive bidder or a net hanger, don’t give up. Don’t not bid because you think the aggressive bidder will out bid you anyway. Aggressive bids often come from experienced auction hunters; they bid fast and often because they feel they will scare other bidders off, and that strategy often works. If the property hasn’t reached what you are willing to spend, don’t give up.
You just never know. The difference between you owning the property of your dreams and not could be the bid you invested time and energy into deciding was something you were willing to spend. Trust in the work you’ve done and stick to your strategy. When you’re waking to the sound of the lake lapping the shore, or water skiing out from your lake house, you’ll remember the confidence that put you in the home of your dreams.