HOWEVER, there are many risks of purchasing property in online auctions, E-Bay Style, and I'm here today to share with you some risks that you MUST be aware of, if you are to engage in the game of online bidding. A breakdown for you, my friends, of the top 5 Risks in Auction Real Estate:
- READ THE FINE PRINT. You may think that the online buying format is very simple, quick and to the point. What you may not realize, is that the fine print takes away whatever the BOLD print gives you. Case in point: I have a client who found a distressed/foreclosure apartment building for $150,000 in Chicago. Seemed like a great deal, until he got past the contract and into addendum's to the contract which took away everything that the contract had given. He was prevented from inspecting, obtaining any information whatsoever, and was required to close all without the benefit of having information necessary to close. This is a bad idea. Be sure to read very carefully and understand what you can and cannot do in such a situation.
- DEMAND INSPECTION RIGHTS AT CONTRACTING AND BEFORE CLOSING. Regardless of what any contract may provide, do not agree to buy property in any condition, from any source (online or otherwise, realtor or not) without having the right to inspect fully (with a licensed inspector) at least once. Any selling party who prevents inspection, invites lawsuits. DO NOT CLOSE WITHOUT AN INSPECTION. PERIOD. END OF STORY.
- DEMAND MARKETABLE AND MERCHANTABLE TITLE. In a foreclosure situation, you may be getting whatever bad title the seller has to sell you. That is unacceptable. You should never purchase from a party you don't know and accept a Quit Claim Deed at closing. As an incoming purchaser, especially in an online/bidding-auction type real estate transaction, you must be sure that the title you obtain in the purchase/sale, is good title, subject to the guaranties of the seller and their assurances of good title. Marketable title means there are no encumbrances, liens, issues which could come up to impede your title or cloud it. A title company must sign off on this and a Quit Claim Deed does not provide the warranty of title that is so important in real estate - EXPECT AND DEMAND IT.
- PROCURE TITLE INSURANCE YOURSELF IF SELLER WON'T PROVIDE IT. You cannot be forced to close on any property without title insurance. It matters whether or not a title company will insure a property, so it makes sense that you should test this by taking the transaction and closing it at a reputable title company which is licensed in your state. If the seller refuses, you have a really good reason to cancel the transaction. A buyer has the right to protect himself, and if you don't, you may be sorry.
- WALK AWAY IF YOU HAVE TO. There is nothing wrong with canceling or terminating a deal because you feel unsure. Usually the contract provides for such a right, but just because there is nothing spelled out in the contract does not mean you cannot cancel. Unless the seller is prepared to take you to court to force you to buy the property, the most you usually can lose is your earnest money and even then, that is not necessarily up for grabs in every transaction. It's recommended you seek the advice of a reputable and competent real estate lawyer who can review the situation and work with you to terminate officially, peacefully and for a full refund of your earnest money.