Buying a property is usually the biggest purchase we’ll make in our lifetime; so it’s important to get it right. Auctions are a hotbed of price fluctuations, disaster properties, repossessions and fair-priced gems you could rarely get through an estate agent for cheaper.
So, yes, property auctions are usually seen as riskier than buying directly through an estate agent, but that risk can pay off. Low prices, hidden gems, and repossessions that have to complete within four weeks. If you’re looking for a quick house sale, for example, an auction is usually the best place to go, so the same applies if you’re looking to buy quickly.
Property auctions are also great places to find beautiful ‘doer uppers’ in need of a little love and attention. Usually selling cheap, they allow you to inject your own personality and breathe some real life into every inch that you rebuild and repaint with your bare hands (or a contracted decorator’s hands, if you’d prefer). This makes them wonderful for property development. If you’d like to buy and sell houses, buying at auction is usually considered the best way to get a bargain and increase your profit margins.
There is risk involved in buying at a property auction, but that risk can be heavily reduced with a few top tips.
1. Finding the right auction
The first step in the journey to becoming an auction ninja is to find an auction house which serves the area you’d like to buy property in. You do this one of two of ways. You either choose a specific area that you’d like to either live in or buy property in to resell (looking at the historic house prices, local amenities and schools is a good place to start), or you can find auction houses in different areas to see which properties pop up.
Subscribing to the auction house’s mailing list will get you a copy of the properties up for auction up to 6-8 weeks in advance of the auction (on average). The auction catalogue should have a guide price, photos, and any legal documents that are available for download (such as land registry searches) and viewing times and terms of sale should be in the email or catalogue somewhere too.
2. The finer details
Things like legal documents, surveys and mortgage in principle agreements are incredibly important when buying any house, especially those at auction. Most legal documents for the property should be available to download from the auction house, but if some are missing or incomplete, then it’s always a good idea to get your solicitor to do a search for you so you know what you’re getting yourself into. Speaking of knowing what you’re getting into, let’s mention surveys. Surveys are incredibly important and basic, structural surveys are required for most mortgages, but it can be a costly endeavour if you might not buy the house. It’s always recommended to get at least a structural survey done, just in case there’s any damage or costly repair work that needs doing (and no one wants their new house to fall down around them). Instead of going all out and getting a full survey done, you can ask a good, experienced builder to take a look at the property with you. They may be able to identify any costly repair work that needs to be done, allowing you to adjust your budget accordingly.
3. The financials
This is the part that no one likes to talk about (at least not as much as the house itself), but there are finer details within the financial transaction with an auction house that are slightly different than buying through an estate agent. For instance, the winning bidder will be required to pay a deposit on the property (usually around 10% – make sure you find out the exact deposit percentage before you go) immediately after the auction has ended. You will then swap legal documents and solicitor information and complete within (usually) around 4 weeks. If the sale is not completed within the time frame stated by the auction house, you may lose your deposit and forfeit the property – so waiting for your mortgage approval is a bit on the risky side. Paying in cash is usually a safer way to pay for your auction property.
Then there are all the bits you already know about; view the property more than once if possible, stick to your budget, get a good solicitor, and make sure you bring all the right paperwork and identification to the auction house (check with them before the auction for more details).
With your dream home just a few steps away, make sure you do it right. You might even want to come back for more, eventually giving someone else their dream home!
This article was written by the property blog, a single platform for all things property.