pre-auction
process

Discover more about the pre-auction process before placing a bid.

How to Research Properties and Perform Due Diligence

Conducting due diligence, or doing your research, is one of the most important steps you can take before buying a property. It is even more crucial when bidding on a distressed bank-owned or foreclosure property. Here are the most vital steps to take before placing a bid.

To begin, review the property details page. It contains valuable information for due diligence, such as photos, property information reports, title insurance information, tax information, the purchase agreement, addendums and more.

Investigate the Property and Surrounding Neighborhood

  • If the property is vacant and interior inspections are permitted (see “Gain Interior Access on Select Properties” for instructions on how to gain access), you can hire a home inspector to assess it. The property details page will have an icon under the bid box that says “Interior Access Available.” You can ask an agent to recommend an inspector or you can find one through a national association such as: ASHI and InterNACHI.
  • Many homes on Auction.com are occupied by former owners or tenants so you will not be able to access the property. (See “Conduct Due Diligence on Occupied Properties” for more information). If this is the case, the property details page will have an icon beneath the bid box that says “Do Not Disturb Occupant.” But there are still ways to investigate to ensure you’re making the right investment. You can drive by and take photos of the outside of the home and check out the neighborhood. Do not disturb the occupants or trespass on the property. See section “Due Diligence on an Occupied Property” below.

Estimate the Home’s Value and Repair Costs

      Are you going to buy and flip?

  • If you plan on flipping a home, you need to know what similar homes sell for in the area. You can review the property information report to view comparable neighborhood sales, research recent sales online or contact a real estate agent.
  • You will also need to know how much it will cost to renovate the property, which may be tricky if the home is occupied. But you can drive by and see if it needs a new roof, paint or other visible repairs.
  • If you plan on making cosmetic repairs like replacing the carpet/floors, upgrading appliances and painting the interior, you can call a contractor to get a ballpark figure or do your own research.

      Are you going to buy and hold?

  • If you plan to buy the property and hold it as a rental, you will need to know the market rents and rental vacancy rate.
  • Regardless of whether you plan to rent the home or live in it, you will still want to know what comparable sales are, although it’s not as urgent because the market conditions may change by the time you are ready to sell.
  • You will, however, need to know the renovation costs. You can reach out to a contractor to get a ballpark figure or do your own research.
  • If you’re going to rent out the property, consult with a real estate attorney to see if there are any local ordinances or laws that might make it difficult to be a landlord.

Review Documents on Auction.com

  • We provide information and documents on each of our property details pages. This may include a property information report, title report, purchase agreement and addendums. Additionally, we provide auction details, which may include the Reserve Price, Est. Debt, Est. Resale Value, previously valued price and other information.
  • Downloadable documents can be found on the property details page. Please note that these reports are intended to provide preliminary information only, which is why we recommend obtaining a full title report.
  • To purchase a full title report, contact a closing company. A real estate agent can also recommend a closing company. A full title report will show you exactly what’s on the title and will indicate if there are any liens for items like unpaid taxes or homeowner association dues. This is important to know before you place a bid.

Determine Financing

  • Most properties are sold on a “Cash Only” or “As-is” basis. This is because many lenders are not willing to provide mortgages on occupied properties since the interior cannot be inspected. If you find a property that is financeable, you will need to provide your loan pre-approval letter. Check the property details page to find out if the property you are interested in is financeable or requires an all-cash purchase.
  • Regardless of whether you finance or buy with cash, you will need to show Proof of Funds within 24 hours of winning the bid. If you finance, your Proof of Funds must be enough to cover both your Earnest Money Deposit and down payment. Proof of funds include bank statements, brokerage accounts, a line of credit or any funds that are immediately available.
  • You may also want to request a liability insurance quote. Check with your insurance agent to find out how much liability and property insurance you may need.

To ensure that you are prepared to bid, here’s a checklist of additional due diligence steps. Or, you may want to consult a local real estate attorney to identify other things to take into account when performing due diligence.

Review Purchase Agreement and Addendum

It’s important to review the purchase agreement prior to bidding to ensure that you are informed about the unique terms of the agreement for the property that you would like to bid on. The agreement is located at the bottom of the properties detail page within the “Documents” tab. The seller dictates the terms of the agreement, which varies per property. The agreement explains your rights as a buyer, along with the seller’s rights. It may include items such as:

  • Access to the property, if allowed
  • Financing conditions, if permitted
  • Buyer’s Premium, if applicable
  • Closing fees and which party pays for them
  • Title insurance and deed options

You may want to review the agreement with a real estate agent or attorney. It is crucial that you are clear about the terms of the agreement prior to bidding because if you become the winning bidder, you will be required to complete and sign the agreement within 1 business day of receipt.

Real Estate Purchase Addendum

Most properties have a real estate addendum. We strongly recommend reviewing it before the start of the auction. The addendum is part of the purchase agreement so you will be legally bound to comply with it. Similar to the purchase agreement, it’s located at the bottom of the properties detail page, under the “Documents” tab.

Buy Under a Separate Entity

If you plan to buy a property under a separate entity, you need to be prepared to provide the documents for that entity if you win the auction. Learn more about Buying Under a Separate Entity.

Conduct Due Diligence on Occupied Properties

Many properties are occupied by former owners or tenants so be sure to check the property details page to learn as much as you can about the home. You can still do your due diligence with the exception of seeing the inside of the property. You can drive by the outside to take photos and observe the neighborhood. You may also want to research the schools and crime rate. But please do not disturb the occupants or trespass on the property.

If the occupants are tenants, it may be possible to continue to rent to them. But if you want to flip the property or live in it yourself, you may want to research eviction laws – just so you are informed in case you need to go that route.

Gain Interior Access on Select Properties

On select properties, interior access is allowed. Contact the agent on the property details page to gain access. If an agent is not listed, contact a licensed agent of your choosing and have the agent call the number on the page. Licensed agents will be required to provide their real estate credentials before they can show you the property.

Work with Brokers and Agents

Real estate brokers and agents are welcome to participate with Auction.com. Commissions are offered on some properties. You can search the site to find properties that offer commissions or check the property details page. Even if a commission isn’t offered, some agents will work with you in anticipation of earning a commission later when you sell or rent the home. If you would like to use an agent, follow these steps:

  • Register to bid on the properties that interest you and add your agent’s information
  • Make sure your agent registers separately for those same properties
  • Inform agents that they do not have bidding privileges