Bidders need to be educated

Here are the mechanics of a real estate auction:

Interested buyers attend open houses for available properties, bringing inspectors if they wish.

Apply for and receive preapproval for a mortgage.

Have your lawyer check over the auction rules.

Get a cashier's check made out to the auction house for the required earnest money, depending upon the property, and bring it with you to the auction.

Be aware that there is almost always a bidder's premium of five to 10 percent, depending upon the value of the property. This is an amount over and above the winning bid that the buyer must pay. This helps the seller pay for the costs of the auction. So if you only want to pay $300,000 for a property and there is a five percent buyer's premium, stop bidding at $285,000.

Arrive at the auction early to register and receive a bidder's number.

Find out in advance what the rules of the auction are. How many units, if any, are being sold, regardless of price? How many are being sold with a reserve, which means the seller reserves the right to reject your offer? Is there are minimum bid or just a suggested opening bid?

Once the auction starts, bidders hold up their bidding numbers to make bids during the fasting-moving proceedings. Helpers employed by the auction house roam through the room, alerting the auctioneer to bidders and urging bidders to increase their price. They work for the auction house. Their job is to get the price higher. They are not your friend, but they will save you from having to shout out your bid.

If the homes are being auctioned in a group or "pool," after you win an auction you choose the particular unit you want and it is removed from availability. You then sit down with paperwork specialists to proceed with the purchase.

Depending upon the auction company, you have a certain number of days to increase your earnest money to the level set in the auction guidelines. If you cannot get financing, you could stand to lose your earnest money. So preapproval for a mortgage is important.

You must then be willing and able to close on the property within the prescribed amount of days, also stated in the auction rules. If you cannot, your earnest money could once again be in jeopardy.

ˆ­- Jean Murphy