Buyer Beware - Auctions aren't really "a deal"

If you're looking for a "GREAT DEAL" be careful you don't make one of these potentially painfall pitfalls.

We've seen sales prices drop 12% in Metro Atlanta in the last year, 28% in the fourth quarter, and that's for the entire Atlanta real estate market, for the condo market it looks even more unsightly. While this sounds like an amazing opportunity for Buyers to seize the opportunity and gain instant equity positions - Buyer's Beware!

We've seen two condominium auctions in the last few months, including the Element at Atlantic Station where 1 bedroom condo units started at $95,000 (previously listed in the 170's) - yet all of the units didn't sell out.

Funny thing is, with certain auction companies you hear on the radio, see on the web or on billboards lock you in on very interesting wording, want you to close quick, and have large percentage of earnest money down (which typically is non-refundable). Foreclosure auction companies (who'll remain nameless) who advertise about these 2 day blow-outs starting at $1,000 a property are usually trying to sell the worst of the worst listings that have been on the market for over a year and no one has touched - yet they lock you in to ridiculous contracts with $5,000 non-refundable down. Amazingly, if you used a realtor with decent knowledge and interest in protecting clients you could have secured these properties already on better terms or after the auction is over & the inventory hasn't sold - the terms will not be as risky to your financial well-being.

Heck, I just spoke with a young woman so excited about the Horizon development that will be auctioned this week - or should I say 40 of the 250 units will be auctioned. They've sold roughly 100 or so units, lets just say they sell these 40 - they'll still have another 100 units to sell. This is an example of a strategy many builders/banks use trying to get at least 50% of the inventory sold so FHA loans will be permitted on the property. But think about your resale capabilities if you need to sell in the next 24-36 months and the development still has a massive inventory of unsold units - how will you compete?

This is a development that truly fits the lifestyle of the Midtown area but is situated outside the loop (the Atlanta Perimiter of I-285). Why are there so many 1/1's when the demographics of that geographic area is more likely to be made up of "empty nesters" who'd be downsizing and more than likely would need 2/2's. But try to get that type of insight from an onsite rep who's promoting an auction rather than the Buyer's best interest.

Hey - if it hasn't suck in and you still feel that these auctions are a great opportunity - never mind class action lawsuits & standing inventory. Just remember, if you end up needing to do a short sale to get out of the property down the line....you'll probably want to have a realtor who's well versed in the process because that may be your only way of competing with builder/bank inventory.