auction.com earnest money

[Nathan Riese]

I used auction.com today for the first time.  I won the bid at $600, I was the only bidder, and it says I met the reserve.  I have two questions:

(1) If it says I met the reserve, that means that the Seller has/will accept the offer, right? They can't counter or reject at this point, right?

(2) The contract says that I need to pay a $2500 Earnest Money Deposit.  But if my purchase price is $600, why would I need $2500 in earnest?

Here's what auction.com said about the transaction details:

• "Buyer will not be charged a Buyer's Premium for this property.
• If you are the Winning Bidder, an Earnest Money Deposit of 5% of the total purchase price or $2,500 (whichever is greater) is required.
• Buyer may receive a Special Warranty Deed or equivalent if Buyer is able to purchase title insurance without delaying the closing (title fees typically cost between $500 and $1500 and are based on the purchase price of the property). If buyer does not purchase title insurance, buyer will receive a Quitclaim Deed or equivalent, with no express or implied warranties of title.
• Buyer is responsible for all escrow fees typically ranging from $850 to $1,375."

Thanks for any insight you can give!

[Brian Burke]

Welcome to BP, @Nathan Riese!

Meeting the reserve is a good sign that your offer may be accepted, but most auctions on that site are sold "subject to" seller approval.  This means that the seller still might reject or counter your bid. I've had that happen to me when I've met the reserve (which I rarely meet, oddly enough). 

It's either funny or sad that your closing costs will be more than the purchase price of the property. Even though the title insurance is about the same cost as the property you should purchase it anyway. If you put money into the property, which you likely would do, you'll ultimately have more than $600 at risk.

It seems crazy to put down a $2,500 deposit for a $600 property but their policy is their policy even though it's strange. You might call their Online Contracts department and see if they'll flex.  My guess is that they won't but I have no firsthand experience because I haven't bought anything from them at that low of a price.

Good luck!