LOUISVILLE, KY (WAVE) – Homes that have been slow to move on the market, sitting vacant in foreclosure, are suddenly selling very fast at auctions. One of those auctions was held Monday night at the Seelbach Hotel by Auctions.com.
"They bid on the property and if they win the property we put them in contract today and within 30-45 days, they close on the property. It's really that simple," said Bob Michealis, vice-president for on online auctions for auction.com/REDC.
But is it really that simple? The Auction.com's auction advertised low starting bids, like $129,000 for a $400,000 home or even $500 for a $102,000 home. However, that wasn't really the case.
"It's very misleading and it's a sales tactic," said Ross Lerner, who has bid in countless auctions. Lerner works as a consultant for private investors who buy properties, like the ones up for bid Monday.
"You can't get houses for $500 or $1000," Lerner said.
Even though Auction.com advertised homes starting at those low bids, there was a buyer's reserve that was not advertised. That means there is a number that the banks, who own the properties, want the bidders to meet. If the highest bidder doesn't meet that price, banks get to choose whether to accept or reject the bid.
"So it's a way to find the highest bid in the room without having to give it up if it's not high enough. It's really in the banks favor to do it this way," Lerner said.
Still there are deals to be had. "It's very good for a buyer, but they have to come educated," said Lerner.
Frequent auction attendee Mike Nemes agreed. "Just do your homework and you will find a bargain."
Several times before the auction, the homes will have open houses, giving potential buyers the time to examine the property closely. "I think it's a great way as long as you take the time to go look at the property," said Nemes.
One thing to keep in mind is the buyer's premium that is tacked on to every sale. At Monday's auction, it was 5% of the purchase price. At some auctions, it can be higher.
Another tip from auction veterans: come up with a maximum spending limit and stick to it no matter what.