Buying property at auction is usually a quicker process than the traditional estate agent route and can often be a chance to have fun. If you’re savvy and do your homework, you might be even able to bag yourself a bargain.
Although there is much to consider, the process can be straightforward if you know what you’re doing. As with everything there are pitfalls to be aware of, but working with the right team such a solicitor to check over the Legal Pack and potentially a surveyor to check the property before the auction… sometimes properties are in an auction because they have problems!
Buying at auction is unlike the traditional route to buying property where all the searches and surveys are done after the offer has been accepted. With auctions all the checking is done BEFORE the bidding starts on a property. Therefore as the prospective buyer, everything that will be supplied by the seller is publicly available to all, upon which an assessment can be made about a potential purchase.
Tips to make your property auction experience hassle free
Check Out Auction Houses
Contact different auction houses that are based in the area you are interested in. Get added to their mailing list so you’re notified about upcoming auctions and are sent the latest catalogues.
Don’t forget to check the terms and conditions of the auction house as well. If you do end up bidding on a property with them, you are agreeing to their terms, so do the homework to avoid any surprises on the day.
It’s also a good idea also to check how to actually make a bid on the day. Auctions can be chaotic, but the process often differs between auction houses so familiarise yourself in advance.
*** TOP TIP *** in the Legal Pack, check the document that is called “Special Conditions” as there may be also sorts of fees and caveats stated in this document
Check Guide Prices
An auction catalogue will list guide prices, but properties can often end up selling for far more….…or less.
Treat the guide price as an indication only and remember that sellers will also list a reserve price, below which no bid will be successful.
Our best tip is always set a budget for how much you are willing to pay and stick to it
Check The Market
You really need to be up to speed with current property prices and the state of the open market in order to bid confidently at an auction.
Also, check recent auctions and see what previous, similar properties sold for. If you are looking to buy property at auction you need to be sure you don’t pay over the odds and a little market research goes a very long way.
Check the Property
Property auctions happen fast but it’s important to check a property out properly beforehand, so you only buy one that’s viable;
- View the property
- Consider taking a builder or handyman with you to find out what may need to do to the property, and how much it is likely to cost. And if you have any queries, don’t be afraid to ask the auctioneer.
- It’s advisable to get a full survey done in advance too. If the property is old and run down, it may have structural issues or other problems that would potentially be very costly to put right.
- Consider getting an independent valuation – if the price is too good to be true….…it usually is. So, if it’s a bargain you’re after, make sure the guide price isn’t over the odds.
Check The legal Pack
This is prepared by the seller’s solicitor and has all the vital legal information, including conditions of sale as well as land registry and local searches details. Obtain the pack from the auction house and ask your solicitor to give it the once over before bidding. They will look for any hidden covenants or loopholes that could end up costing you more than you bargained for.
Check the Finances
You will be required to pay the deposit for the property on auction day and the balance will need to be paid within the time frame specified in the pack. Unless you’re lucky enough to be a cash buyer, you will need finance in place before bidding.
If you’re using a buy-to-let mortgage, make sure you arrange it well in advance
Think also about the maximum price you are willing to pay for the property. Auction properties can be cheaper than market value, but substantial renovations are usually needed. Make sure you know how much the deposit will be and check which method of payment is required so you can arrange for sufficient funds to be available.
So, you’ve done the checks and are all prepared, but what happens on auction day itself….?
>Be Punctual
Arrive at the auction house well before the advertised starting time so you can find out if there are any changes to a property. These would be made available in an “addendum” or announced by the auctioneer before the auction starts and could potentially have a bearing on your decision to buy.
Make Your Bids Clear and Concise
When the time comes, make sure your bids are clear. You may have been given a paddle or something similar so that you are identifiable to the auctioneer.
Alex, one of the directors at Horizon Lets has this piece of sage advice…
“Don’t get carried away, try to remain calm, and stay within your set budget”
It may sound simple but it’s sometimes all too easy to get carried away with the excitement of it all. Watch the auctioneer carefully too as they should make it quite apparent where and what the current bid is in the room.
Get Someone to Bid on Your Behalf
If you don’t want to bid personally, someone else like an agent or solicitor can bid for you. Some auctioneers also accept phone or proxy bids – to do this the auctioneer will require written authorisation from you and a cheque for the deposit, which is calculated on the amount of your maximum bid.
Successful Bids
If your bid is successful, you are bound by the terms and conditions of the sale when the gavel comes down. A contract is created between you and the seller, and you won’t be able to back out.
You will be required to sign the memorandum of sale and pay the deposit there and then. Other money you’ll need to pay includes auction house fees, stamp duty land tax, solicitor fees, survey costs and buildings insurance.
The remaining balance for the property will be due within the specified time frame, which can be any time between 14 days and 6 weeks.
Unsold Properties
If a property is unsold the auctioneer may have the authority to sell it privately in the room immediately after the sale.
Make sure to register your interest with the auctioneer prior to the sale and stick around at the end of the auction.
We hope our article has given you the confidence to try and purchase a property at auction. Happy bidding – and don’t forget, if you’re successful and want a trusted letting agent to manage your new purchase, Horizon Lets would be delighted to have a no-obligation chat.
Related Articles
- Buy Your First Buy To Let Property
- Buying a Buy To Let Property
- Five Things to Consider Before Investing in a Buy-to-Let Property
- Guide to Buying Property at Auction
- How To Be A Successful Overseas Buyer
