In my opinion, the Diablo 3 Real money Auction house will really help the game economy. Do you remember how the Diablo 2 economy was BAD? There was nearly no place to trade and people were used to sell/buy items outside of the games. The AH will help all of this. I cant wait to try it out.

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Homes listed for sale on Zillow aren't the only properties out there. Sometimes, homes are auctioned due to foreclosure or other reasons. Buyers and investors can capitalize on these auction opportunities to purchase a home, sometimes at a significant discount. They aren't as always easy to find as regular listings, however, and inexperience in the bidding and purchasing process can be a barrier to entry. Here's what to know about buying a house at auction.

Why auctions happen

A home can be auctioned for several reasons, but in many cases, it's because the existing owner of the property is experiencing financial trouble. The most common reasons for an auction sale include foreclosure, failure to pay property taxes and outstanding issues with a homeowners association.

'When a homeowner doesn't make regular payments to the lender, sometimes the lender has no choice but to foreclose on the property,' explains Colby Hager, CEO of Capstone Home Buyers in San Antonio, Texas. 'When this happens, the property is often put up for auction.'

In the last several years, the foreclosure rate has decreased due to a strong economy and job market. That trend continued through 2020 - despite the economic turmoil of the pandemic - thanks to government measures. Once the moratorium is lifted, however, that drop in foreclosures is likely to reverse.

How the auction process works

There are two broad classes of real estate auctions: open and blind, says John Castle, a real estate investment agent with Keller Williams in Ottawa, Ontario, Canada.

'In an open auction, every bidder knows what others are bidding,' Castle explains. 'In a blind auction, the bidders don't know. Both types of auctions [generally] have a reserve value,' which is the minimum bid the seller will accept.

'Typically, that amount is the debt owed to the entity that put the property up for auction, such as the tax debt owed or value of the loan on the property,' Castle says.

Open auctions may be conducted online or as a live auction, in person. With the latter, bidding often occurs at an auction house, courthouse or city hall.

'In most open auction formats, each bid must be higher than the last bid, and the auction ends when no participant bids higher than the most recent bid, or the bidding may end at a specified time,' Castle says. 'The highest bidder acquires the property.'

This highest-bidder-wins method can take place in a 'minimum bid auction' as described, or in an 'absolute auction,' which has no minimum bid, or a 'reserve auction,' a combination of both. In a reserve auction, the selling party sets a minimum bid, but if none of the bids meet that minimum, the seller can withdraw the property from auction.

Since there's no reserve prices set, absolute auctions can happen even when there's only one buyer. In that case, with no other competitors, the buyer could get the home for a steal.

Before participating in an open auction, bidders have to agree to the terms of the auction by completing the requisite paperwork or accepting an end-user license agreement, according to Castle.

Bidders also need to verify their identity and demonstrate their authority over any legal entity (such as an LLC or holding company) that will take the title of the property, if applicable.

Furthermore, a deposit is often required before getting permission to participate in the auction.

By contrast, in a blind property auction, the bidder's identification may be given to the party accepting the bid. A deposit is commonly submitted with the bid along with an agreement accepting the auction's terms - all of which are usually enclosed in a sealed envelope.

'The actual auction can get very hectic,' Hager says. 'There are usually multiple auctions being held simultaneously within a small area and often multiple bidders for each property. The auctioneers move quickly, so it can seem chaotic to anyone unfamiliar with the process.'

Every foreclosure auction will have its own unique procedures, which can also vary according to local and state laws.

How to buy a house at auction

1. Consider the rewards and risks

Video: Jill Martin’s steals and deals on at-home must-haves (TODAY)

The main benefit of purchasing a home at auction is the ability to buy a property for below market value. Put another way: You may be able to score a sweet bargain.

But there are risks, too, says Suzanne Hollander, an attorney and real estate professor at Florida International University in Miami. These include:

• You usually can't have the property professionally inspected, which could lead to surprises like squatters in possession, structural problems or physical damage to the residence.
• You generally must pay all-cash; financed funds are almost always not accepted.
• It's your responsibility to conduct the necessary due diligence. This includes investigating title issues and outstanding liens.
• You must pay for all back taxes in many jurisdictions. In addition, if it's a home in an association, you could be liable for unpaid HOA fees.

What's more, there's the danger you could overpay for an auctioned property, especially if you don't have experience with property auctions and haven't researched the home and its value carefully ahead of time.

2. Know where to look

You can find auction opportunities in local newspapers, online through auctioneer sites like Auction.com and posted in public places like a county courthouse.

'In bigger markets, many real estate investors subscribe to specialized subscription services that provide precise information about properties that may be auctioned,' Hager says.

Additionally, some investors purchase foreclosure lists and property-related data to find out more about homes coming up for auction.

3. Assemble an expert team

Consult with an experienced real estate agent before the auction to determine an estimated market value and what the property will likely sell for. Your agent may also be able to obtain permission for you to tour the property before the auction. (Castle notes that bidders are usually not allowed to walk through the home on the day of the auction.)

'A real estate attorney can also help you understand the terms of the auction,' Castle says. 'Your attorney may be able to conduct a title search to ensure the property is free of liens and other encumbrances that you may have to pay if you are the winning bidder.'

4. Bid with cash

In the majority of auctions, you can't finance the purchase with a mortgage, so you should be prepared with cash in order to bid.

'The most common rules are that you must conduct your due diligence prior to the auction, attend the auction with funding in hand, and often register with the auctioneer and receive a bidder number,' Hager explains.

If you ultimately have the winning bid, you'll have to complete paperwork and pay for the property either immediately or within 24 hours.

'The money is due at the time the auction concludes,' Hager says. 'Most auctioneers take payment from verified funding sources, such as cashier's checks. Excess funds paid to the auctioneer are generally returned to the buyer within two to six weeks.'

5. Obtain ownership of the property

If you are the winning bidder, depending on the circumstances of the auction and applicable laws, you may or may not be provided access to the home on the same day. It's possible that the foreclosed home, for example, may still be occupied by the delinquent borrower until the lender later gets possession of the property and the title, which will then be transferred to you.

Be aware that, in some states, a homeowner who loses his or her property at auction for unpaid property taxes can redeem their house or buy it back within a specific period of time known as the 'redemption period' - 'but that homeowner must work with their local government agency that oversaw the process of the delinquent tax auction in order to redeem that property,' Hager says.

In this scenario, the delinquent homeowner is required to pay back the balance of their taxes during a cancellation period, which may extend for up to one year, Castle says.

If you purchased a home at auction that was later redeemed by the homeowner before the end of the cancellation period, you will be refunded your full purchase price, according to Hager.

'A delinquent borrower losing their home to foreclosure can participate in the auction,' as well, Hager says. 'However, if they have the funds to participate in the auction, it would have been more cost-effective to negotiate with the lender prior to the actual auction.'

Should you buy a house at auction?

Buying a home at auction can yield a great bargain if you do your homework and can withstand the risks.

'You need to know how to research the title [and] make sure you are buying a first position lien, not a second position lien that could be wiped out,' Hollander says. 'Understand your obligations to pay cash and when, and realize there are many risks involved.'

That's why auctions are often attended by real estate investors seeking to flip a property and make a profit.

'It works well for people with a great deal of experience or who are comfortable asking for help filling in gaps in their knowledge,' Castle says. 'It's smart to go into the process with ample cash reserves, as well, which will reduce associated risks.'

An alternative could be to purchase a property sold via a short sale, which typically comes with the right to inspect, a warranty deed and the peace of mind that the seller must pay any outstanding liens and taxes before closing.

Learn more:

Real Money Trading or RMT, refers to the practice of spending real money for digital goods such as game items, characters, gold, or other such features or services.

Diablo III officially supports and allows RMT through the in-game Auction House.

• 2RMT in Diablo 3
• 3Korean Games Rating Board

Background[edit | edit source]

RMT has a long and fairly sordid history, and has been illegal, or strongly discouraged by most Western game developers, especially in MMORPGs. (Where RMT is most common, since the games have virtual economies in which gold and other resources have real value.)

Prior to Diablo III, Blizzard did not permit any form of RMT in their games, and the company has engaged in long-running and generally-successful efforts to stop character leveling services and gold farmers/sellers in World of Warcraft. This isn't to say that players can't legally buy extra features and services in WoW; Blizzard began selling special mounts and other features for real money, and also enabled realm transfers and character faction transfers in 2008.

RMT in Diablo 3[edit | edit source]

To the shock of most observers[1], in July 2011 Blizzard announced that the Diablo III Auction House will have a real money aspect to it. The real money is only usable for item (and eventually character) sales for softcore (non-hardcore) characters, and it operates in tandem with the in-game gold trading auction house. Players may list items on either service. Blizzard charges a flat fee for each item listed (to discourage players from flooding the market with junk items), then takes another fee from successful sales. Proceeds can be spent on Blizzard merchandise and games, or withdrawn in actual currency, after another fee is paid to Blizzard and the financial partner.

See the RMT section of the Auction House article for more details.

No Hardcore RMT[edit | edit source]

Since the first announcement of the Real Money Auction House, Blizzard has been adamant that Hardcore characters will not have access to it. Hardcore characters can use the Gold Auction House, but there is no real money element to Hardcore item trading. From the original Auction House FAQ:

This seems to contradict one of Blizzard's main reasons/excuses for adding the RMAH -- that players were selling items for gold anyway (in Diablo 2) and having to use shady third party sites to do so. That players will use third party sites, or perhaps even ebay, to sell items in Hardcore is clear, and Blizzard has not yet addressed this contradiction.

One explanation offered by fans is that Blizzard is worried about the legal issues of permanently lost items. The question is, if Blizzard enabled currency trading in Hardcore, took their cut of the sale, and players then lost (forever) the items or characters so purchased due to a Battle.net realm failure or other technical issue, could players sue Blizzard for the loss of their investment? Sue to regain the transaction fee?

Blizzard has never commented on this issue, but as legal issues pertaining to the the ownership of virtual items remain in an evolutionary state, it's not unreasonable to think this factored into Blizzard's no-RMT in Hardcore policy.

RMT Fees in Diablo 3[edit | edit source]

The RMAH fees were initially set at $.15 for an item listing and $.65 for an item sale, with a minimum price of $1. This was adjusted in Beta Patch 13 when several major changes were implemented.

• The gold auction house is once again available for testing
• The listing fee for all auctions has been removed
• The transaction fee for auctions in the currency-based auction house has been increased to 1.25 Beta Bucks
• The minimum listing price for an item in the currency-based auction house has been increased to 1.50 Beta Bucks
• Players may now only have 10 active auctions per auction house
• Tooltips have been added which will allow players to compare items on the auction house to the items they're currently wearing

The Fees are Too Damn High![edit | edit source]

Bashiok argued back against criticism of the RMAH fees in a forum post in late December, 2011.[2]

As some fans pointed out, the 'low as possible' figure is whatever Blizzard sets it to. After all, they're handling the entire transaction -- there are no outside fees -- so they could set the price to zero, if they wished. Obviously they need to cover their costs for hosting Battle.net and developing the software in the first place, and moderation and support, but that would surely cost a lot less than eighty cents per sale.

There are other factors, of course. Since there's no subscription fee for Diablo III, Blizzard is using the RMAH to generate income off of Diablo III long term, or at least clear enough to cover the hosting costs. Also, if auctions were all free, players would post everything without any judgment, entirely spamming up the process. Some cost keeps the system from being clogged by junk, and provides a basic check on the lowest level of the economy. The listing fee was eventually removed, while the maximum open auctions per account was lowered to 10.

Will Blizzard Manipulate the Economy?[edit | edit source]

Conspiracy theorist fans have been speculating about Blizzard's ability to game their own Auction House since the system was first revealed. Blizzard has, of course, denied that they would ever do such a thing.[3]

The fact that auctions are entirely anonymous, and that the quantities of items being sold will be so high, makes these sorts of accusations easy to make, since there's no way fans would ever catch on to minor market manipulations. Aside from Blizzard's vows that they will never do such a thing, the risk/reward seems crazy, and keeps most fans from seriously considering this possibility.

Blizzard's economic model is to make a small profit per sale on millions of sales. If Blizzard were found selling fake items or cheating the system, the backlash, bad publicity, and lawsuits would cost them far more in lost goodwill and business than they could ever hope by cheating the system.

Korean Games Rating Board[edit | edit source]

Late 2011 and early 2012 saw a lengthy saga as the Korean Games Rating Board repeatedly refused to certify Diablo III for sale in Korea, due to the Real Money Auction House. Korea strictly regulates all forms of gambling, online or off, and by their laws, the Real Money mechanism built into Diablo III turns it into a form of gambling. A quote from the online Korea Times explained the potential problem in September 2011.[4]

The issue of gambling, illegal for Korean nationals, is a sensitive one, especially after a 2005-06 nationwide scandal over the Sea Story game machines that first passed the regulatory body inspection but were removed after the police discovered excessively speculative and addictive behavior among the players. Due to this controversy, the watchdog and approval committee was created in the Game Rating Board.

The country’s attitude toward gaming involving cash transactions has irked Blizzard’s local staff who are reluctant to deal with the controversy expected with the introduction of the auction house but are forced by headquarters to launch the feature, an industry source familiar with the matter said.

These predictions came to pass, and when Diablo III was submitted to the ratings board in early 2012, there were numerous delays. Blizzard tried a second time with the 'cash out' element removed, but still did not win approval. Only when they submitted Diablo III without any RMAH at all (just a Gold Auction House), did the game win approval on January 13, 2012.[5]

Korean RMAH Timeline[edit | edit source]

Mmo With Real Money

• September 26, 2011: First word that the KGRB might have problems with Diablo 3's RMAH.

• November 16, 2011: Kotaku Australia points out that the RMAH might make Diablo III illegal in Korea, as other titles with any semblance of real money or gambling have been banned or restricted in that country.

Mmorpg With Real Money Auction House

• December 15, 2011: Bashiok insists that the Korean delays are not to blame for the full game not yet being released.

• January 2, 2012: The KRGB again declines to rate Diablo III due to the RMAH feature.

• January 4, 2012: The ratings board again declines to approve Diablo 3, even with the 'cash out' feature removed from the RMAH.

• January 7, 2012: The Ratings Board again declined to approve Diablo III, despite additional adjustments to the RMAH feature.

• January 13, 2012: Diablo 3 is approved by the KGRB, 'without the RMAH feature. If Blizzard wishes to include the RMAH in Korea, they will have to resubmit it to another ratings agency at a later date.

• January 14, 2012: Players ask if they can play on the Korean servers to avoid the RMAH in other regions, and get confused and contradictory replies from Bashiok. (The thread is soon locked and then deleted, leaving the question unresolved.)

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RMT in Other Games[edit | edit source]

Other developers with less popular games have taken more pragmatic approaches, and some have come to accept RMT in their games, with them the eBay-like recipients; skimming some % off the top of every auction or cash trade.

Many other games, especially ones popular in Asia where most players play in baangs and pay an hourly fee (which makes the concept of paying a bit more for better items or other upgrades seem a natural extension of the financial model), are more accommodating of RMT. RMT is seen in virtually every 'free online' game, since those use RMT and ad banner loads to fund their operations. In popular games such as MapleStory, the basic game is free, but players can buy cooler outfits, better equipment, or access to the full game or extra dungeons/items, for cash fees.

Additional Information[edit | edit source]

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• Markco writes extensively about the RMAH and gold auction house at Diablo 3 Gold Guide.

• The Virtual Economy page on Wikipedia.org provides a comprehensive overview of this issue.

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• Scott Jennings, a long time industry insider, discussed the distaste most Western gamers feel for RMT, and later wrote a more general overview of the realities of RMT in his weekly gaming column.