Most auction houses don’t use the Arizona Association of Realtors’ (AAR) purchase contract form. They’re national corporations; they use their own forms.
REDC doesn’t publish their purchase contract online. However, I’ve seen other auction companies’ purchase contracts, and noticed that many of the buyer’s rights under the AAR contract are not in the auction contracts.
Most importantly, the AAR purchase contract gives buyers the right to cancel the purchase and receive a full earnest money refund if:
- the property doesn’t appraise for at least the purchase price
- the buyer isn’t approved for financing
- the buyer doesn’t like what s/he found during the home inspection period
Most auction houses don’t allow buyers these rights, known as “contingencies”.
Simply put, if the house doesn’t appraise for the winning bid amount, you must buy it anyway or forfeit your earnest money. Your mortgage lender denied you a loan? Oh that’s too bad. Will that be cash or cashier’s check? Oh, you don’t have the cash to buy the house? Ooooh. Well, we’re just gonna have to take your earnest money. Better luck next time.
A Great Deal?
Two tips if you’re considering attending the REDC auction on June 13:
1) Consider the cost of the marketing fee the auction house adds to your purchase price.
At the REDC auction on June 13, a 5% marketing fee is added to the winning bid. That means the house must be at least 5% below prevailing market prices before it’s worth it to have bought at the auction.
2) Do a thorough home inspection before the auction, including a contractor’s estimate for repairs and a Realtor’s or appraiser’s estimation of value.
Know exactly what you’re buying. Does the roof leak? Does the A/C work? How about the water heater? Does the house have termites? Foundation damage? Slab leaks?
The old saying “you get what you pay for” has been around long enough to get old because it’s often true.
I’ll be attending the June 14 auction. If you’d like to attend with me, call or email.
602-999-8831 or Heather@ThePhoenixAgents.com