QUESTION: What steps should I take to buy a home at a real estate auction?

ANSWER: Buying a house at auction is quite different from buying a house the conventional way through private treaty. Here are some key differences:

There are no contingencies. You cannot simply withdraw the winning bid because you cannot get a mortgage or you cannot sell your current house in time.

If you back out, even for a good reason, you could be liable not only for the earnest money (usually 25 percent of the high bid in most auctions), but also for damages which are clearly stated in the signed contract you were required to sign on auction day.

STEPS TO SEIZING A GOOD REAL ESTATE DEAL AT AN AUCTION

Get pre-approved for a mortgage. Typically, you will have two weeks to 30 days to close. The first thing you want to do is make sure your lending source will be willing to lend you the amount of money you will want to buy the property for at auction. You don't want to wait until after you make the winning bid before you obtain approval for a mortgage loan.

Find real estate auctions where you live. A good place to start is in the local newspaper's classifieds. Or, look up "auctioneers" in the Yellow Pages and call; they will be happy to help a potential buyer. The National Auctioneers Association's Web site (www.auctioneers.org) or the National Association of Realtors' Web site (www.onerealtorplace.com) lists dozens of upcoming auctions nationwide. Or, www.auctionweb.com offers an online list of affiliated real estate auctioneers.

Set up an inspection. Once you get a list of properties that will be up for auction soon, visit the ones that interest you and arrange for inspections of the ones you would consider buying. Hire someone to inspect thoroughly each property you're interested in. Unless you're rich, you will have to be selective because each inspection costs money. You can ask the auctioneer to allow an inspector onto the premises days or weeks before the auction, or you might have to wait until the day of the auction. Experts agree that you shouldn't skip this step. It bears repeating that you buy a property at auction as is, defects and all, and it is up to you to detect problems before you bid.

Ascertain with the auctioneer that the property has free and clear title. An organized and thorough auction company will have a written, current title opinion showing the property is clear and a lot survey showing any encroachments prior to the sale for all to review. Before a lender will give you a mortgage, it will assess the property. Hidden defects can lower the assessment to the point that the lender will refuse to give you a mortgage.

Decide on your maximum bid. Zero in on the property you want and decide on your maximum bid. If you come to a real estate auction with a maximum figure in your head and you know not to spend any more than that figure, you can be safe. You just don't want to be caught up in the excitement and overbid your limits.