Is it worth buying a property at auction? Learn about the advantages and disadvantages

Know if is it worth buying property at auction It is very important, since there is a great divergence of opinions on this subject.

Some argue that the low price makes up for anything, while others believe that buying a property without up-to-date information may not be a good idea. Who's right?

Today's material was produced with a variety of relevant information on the subject, to help you reach a conclusive answer.

So, to find out if this alternative makes sense for your life, keep reading!

What is an auction property?

The first step in determining whether it's worth buying an auction property is to understand what an auction property is, so we'll start with that.

An auction property is nothing more than a property that has undergone a judicial execution process, that is, it has been taken from the owner's possession due to default.

After being removed from the owner's possession, this asset becomes the property of the creditor bank, which holds an auction in order to recover the amount of the debt.

So, to put it simply, the property is basically lost due to debt, and to recover the “lost” value, the bank auctions it.

In general, this auction value is well below the common market price, as the idea is to recover the value as quickly as possible.

It is important to clarify that this is a common property, but with a value below market value because it was transferred by court order to the bank as a means of paying off a debt.

So, if you've ever heard that auction properties are condemned, or that they will never be yours after purchase, forget those ideas, as they are untrue.

Read also: What is a Negative IPTU Certificate and how do I request one? – Valor Notícias.

What are the advantages of buying a property at auction?

Now that you know what it is, we can move on to presenting the main advantages of purchasing a property at auction.

But remember, it's not possible to decide whether an auction property is worth buying based solely on its advantages, as we'll see later that there are downsides to consider. Check it out!

1. Price below market 

Certainly the main advantage of buying a property at auction is the price, as banks tend to ignore the property's appreciation.

Therefore, auction bids usually start at values corresponding to the lowest appraisal price.

There are auction properties that, if purchased outside this category, would have a price of R$ 300 thousand, but, within the auction, bids start at R$ 130 thousand.

So, if you want the opportunity to buy your own property without paying the high prices of the current real estate sector, it is certainly worth buying a property at auction.

2. Possibility of purchasing the auction property with financing

In the case of Caixa Econômica Federal in particular, it is possible to purchase property at auction through financing.

So, if you don't have the full value of the property, you can still make a down payment and pay the rest in installments with the bank.

In general, the price ends up being more expensive due to interest, but it is certainly cheaper than purchasing a property that is not at auction.

It is important to note that not all properties allow financing, so it is necessary to consult in advance.

3. Live in well-located neighborhoods while paying less

Location is the main factor that dictates real estate prices, meaning that well-located neighborhoods tend to have more expensive properties.

But, we must remember that expensive and well-located properties also come up for auction, so this could be your chance to live in a good place for much less.

It's worth mentioning that the price of these properties certainly won't compare to the more basic ones, but they are still well below the regional average.

So, if you evaluate carefully, you'll see that it's worth buying a well-located auction property, due to the attractive price for the region.

++How to calculate financing interest? Understand – Valor Notícias.

Is it worth buying a property at auction? What are the disadvantages?

Not everything is perfect, and like any other type of proposal, buying a property at auction certainly has its drawbacks.

In this case, these disadvantages are not guaranteed, and depend greatly on the type of agreement signed.

Furthermore, it is possible to count on professional assistance with this type of purchase, which ends up reducing most of these “obstacles”.

But, it’s still worth mentioning, so follow along below.

1. Need for reform, in most cases 

Auction properties often remain closed for a long time, as a judicial execution process does not happen overnight.

Furthermore, it is not uncommon for the former owner to end up deteriorating the property precisely to “sabotage” the bank.

Therefore, when purchasing a property at auction, you will almost certainly need to have a reserve for renovations.

And, considering that until the moment the purchase is official, most auction companies do not grant the right to visit the property, it is practically impossible to predict its exact condition.

2. Eviction of former owners 

This does not happen in all cases, but it is quite common for the bank to be unable to evict the former owners before holding the auction.

Therefore, after purchasing the property, you will have to file an eviction process, which can cause headaches and costs.

Therefore, it is worth consulting the auction administrator in advance about the occupation of the property, in order to prepare for this.

If you're unemployed, this is great news, as you won't have much to worry about.

3. Time-consuming process

Buying a property at auction isn't quick, as we've seen, you have to wait for the auction process itself, and then there are the steps of occupying the property itself.

So, if you don't have the patience or even can't wait, buying a property at auction may not be the best option.

4. Buying “in the dark”

We've already talked a bit about this, but most auction administrators don't provide detailed property information.

Therefore, it is common to have few photos, and in most cases these are old.

Furthermore, especially if the property is occupied, you will not be allowed to visit it, so it ends up being a blind purchase.

Therefore, many auction buyers are surprised by the condition of the property, which ends up being a disadvantage.

After all, is it worth buying a property at auction?

Throughout this material, we present both the advantages and disadvantages of buying property at auction.

As we can see, there are more disadvantages than advantages, but as for the disadvantages, they can be easily solved.

This is because, when hiring a consulting service, it is possible to choose a property with excellent conditions, including vacancy, updated photos and even the possibility of a visit.

So, deciding whether or not it's worth it depends a lot on your priorities and possibilities. After all, if you can renovate, what difference does it make if you need to renovate?

Considering that the price is well below market value, the renovation will certainly be worth it.

So, evaluate your situation carefully to decide whether it's worth buying a property at auction!

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