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Solutions To Problems Associated With Buying Real Estate Using Online Auctions
Buying a property through an
online auction site has become
increasingly popular ever since
the 2008 recession. Online
property auctions give sellers
(usually lenders) the opportunity
to sell their foreclosed and
repossessed inventory (REO’s)
quickly and gives buyers the
chance to purchase properties
for substantially less than
Online property auctions can
generate great deals, but there
are also risks associated with
purchasing auctioned property
— usually with the provisions
embedded in the auction
company’s purchase agreement.
Online auction companies act as
the seller’s agent. The “transaction
facilitator” or “desk agent” does not
represent the purchaser, so relying
on any statements or assurances
from an ‘account representative” is
a poor idea.
Hire your own real estate attorney
or agent to assist with the
Auction purchase agreements are
notoriously one-sided, with most
rights and discretion to act or not,
vested with the seller. Buyers have
very few rights except for cancelling
the purchase agreement performing
a timely property inspection. Even
then, some contracts will release a
purchaser of their contractual
obligations, but will refund only a
portion of the purchaser’s entire
deposit after poor inspection
If one is unsure of the impact of
certain contract provisions, then
have the contract reviewed by your
own real estate attorney.
Buyers must be careful to review
and understand timelines within
the purchase agreement. There are
time limits for conducting property
inspections, notification, reviews,
closings, and obtaining approval
for financing. A Buyer’s failure to
meet a specified timeline could be
cause them to lose their deposit or
allow the Seller to cancel the
contract. Remember to get any
time extensions in writing.
Most auction sales contracts
contain ‘boilerplate” language, and
buyers are often told that the ‘take it
or leave it” language limiting buyer’s
rights, cannot be changed. This isn’t
always true. Many provisions in a
purchase agreement can be
negotiated, although when it comes
to replacing seller’s third party
vendors such as a title company or
inspectors, it’s unlikely.
Remember, all changes to a contract
in real estate must be in writing.
One should secure the services of a
professional negotiator such as a
real estate attorney, if a buyer does
not regularly engage in and
negotiate real estate transactions.
In today’s relatively robust real estate
sales market, one has to ask why a
property isn’t sold on the regular
“retail” market. I suspect that there is
a defect in the property’s chain of title
or there is a legal defect in the
process in how the lender / seller
obtained title. Auctions are a way to
sell property without making any
warranties or assurances to
prospective buyers that would
otherwise have to be disclosed on the
retail real estate market.
Buying property through online
auctions can save thousands.
However, the process is fraught with
risks. To avoid disappointment,
buyers should have a real estate
professional review the transaction
process and terms before committing
to a price at auction.
Since 1990, attorney David Soble has represented
lenders, loan servicers, consumers and business
owners in real estate, finance and compliance matters.
For over 25 years, he has been involved in thousands
of real estate transactions and has successfully
negotiated and saved millions for his business and
ABOUT THE AUTHOR
31800 Northwestern Hwy.
Farmington Hills, MI 48334
Phone: (888) 789-1715
Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own, qualified attorney.