A reader emailed me to inquire about the Lumen Condos auction that is currently being advertised on our sidebar, asking whether there are any “catches” or “gotchas” that aren’t easy to spot.
Auctions like this usually have a few things that might be described as “gotchas.” Here are a few things to look out for:
- Minimum prices that may or may not be stated beforehand (e.g. – bidding starts at $50,000, but really they won’t let the unit go for less than $150,000).
- Seller usually reserves the right to end the auction at any time without prior notice, so if you show up and are hoping to bid on a unit near the end of the auction you may not get the chance. I know this happened at the Seventeen07 auction back in October, when they held back the last few units due to low bidding volume.
- They may require financing through a specific bank or the builder.
With respect to the above list, the terms and conditions for the Lumen auction state the following:
- “The Seller has established a minimum selling price (Published Reserve) for each property to be auctioned. No bid below the published reserve will be recognized by the Auctioneer. There are no Buyer’s Premiums or Hidden Reserves.”
- “The Seller has the right to postpone or cancel the Auction in whole or in part in its sole discretion.”
- “All auction bidders are required to be pre-qualified with Seller’s Designated Lender prior to the Auction, including those bidders who wish to use another lender for their purchase, and bidders who will pay cash for their purchase.”
Also important to note is the clause that the seller reserves the right “to modify or add any terms and conditions of sale and to announce such modifications or additional terms and conditions either prior to or at the Auction.”
If you are thinking about buying a home at auction, I suggest attending 2-3 such auctions to get an idea of how things work and whether or not things tend to sell for prices that you think are reasonable.
The firms running these auctions are happy to provide all the fine print details about the auction to you beforehand. If you get them and there are parts you don’t understand, you may consider hiring a real estate attorney to review them and explain them to you.
Furthermore, I received an email today from the Lumen auction folks about a “pre-auction seminar” they will be holding on July 1st:
On Wednesday July 1, 2009 LUMEN will hold a pre-auction seminar for interested buyers of the remaining 19 new condos available in one of Seattle’s most unique developments. Potential homebuyers will have the opportunity to tour available condos, learn techniques for buying at auction, participate in a mock auction, pre-qualify with the seller’s designated lender and pre-register for the LUMEN public auction to be held July 11.
What: LUMEN “How to Buy” pre-auction seminar and registration
When: Wednesday, July 1, 2009 at 7 P.M.
Where: LUMEN Lounge, 501 Roy Street, Seattle, WA 98109
Obviously the underlying purpose of this event is to get buyers interested and excited to buy the condos, but it would probably still be a good idea to attend if you are thinking of going to the auction.
The question of whether or not the Lumen condo auction or any other real estate auction represents a good buying opportunity for you depends entirely on your unique finances, priorities, and tolerance for risk. As with any real estate purchase, the best thing you can do is take your time, do your research, and don’t rush into a decision based on emotion.