How to buy a property at auction
Arthur investigates what you should do if you are considering buying a property from an auction house.
People often choose to buy a property at auction because they can sell for cheaper than their market value.
In the past, many people shied away from buying a property at auction as it was seen as either too complicated or too much of a risk. It was thought that this should only be attempted by experienced property professionals. Increasingly, though, people are using auctions to buy their new home or to invest in a property for profit. Auction houses are a good opportunity particularly for first time buyers who might not be able to get onto the property ladder otherwise.
Additionally, buying at auction lets you avoid the drawn out process of buying a home through an estate agent. It does have its fair share of risks, however, since when the hammer falls, the property is yours. Therefore, it is really important to do your research before you rush in and buy.
Finding the right property
The real danger of bidding on properties at auction is acting on impulse.
While it may seem exciting to bid on properties in the spur of the moment, you should research the property you are planning to bid on thoroughly before the auction.
Spend time searching through the catalogue to find a property that suits you.
There is usually a four week gap between the publication of the auction catalogue and the date of the auction which gives you plenty of time to weigh up your options.
Viewing properties
After you have found a property you are interested in from the catalogue, contact the auctioneers to arrange a viewing.
It is wise to compare the guide price of the property you are interested in with similar ones being sold by local estate agents so that you can work out what it is truly worth. Note that the guide price can fluctuate depending on the interest it receives before the auction.
When you go to visit the property it is important that you keep an open mind. Many auction properties are not in the best condition, hence their lower prices. You should try to focus on the space rather than the state of the property in order to see its full potential.
It would also be a good idea to take a professional with you, either a builder or an architect, who will be able to tell you what can be done with the space and at what cost.
Research
When buying a property at auction you should consider investing in a home buyer’s report, costing in the region of £600, or a building survey for older properties.
Surveys will assess the condition of different parts of the house and will work out what needs to be repaired in addition to any costs involved with maintenance of the property.
If your bid on the property is not successful you would lose the survey fee.
However, because auction properties are usually in worse repair than those sold through an estate agents, it is worth it to safeguard yourself from making an investment which loses you money.
When at the auction
If it is your first time going to an auction you could do a practice run where you visit an auction without an intention to buy. This will help to familiarise yourself with the process.
You will need to bring with you two forms of identification and you must provide proof that you are able to pay for a 10% deposit on the property.
Finances
Before you go to the auction, make sure you have your financial arrangements in order.
Upon being successful with your bidding, you are expected to pay a 10% deposit on the day of the auction and within the next 28 days you are required to pay the remaining 90%.
If you are unable to pay for the property in full, you should seek to arrange a mortgage with a bank or building society.
When you go to an auction you should try to keep a figure in your head of the maximum amount you would be willing to pay for the property. While it can be tempting to go over budget when you have already invested your time and money (e.g. if you have arranged for a survey), it is important to remember that there will always be other properties at auction that will sell within your price range.
Properties at auction always have a set reserve price which is not disclosed to bidders. If the property does not meet its reserve price, the vendor may still be willing to make a deal with the highest bidder after the auction has closed.
You can search for upcoming auctions near you by clicking here.
If you are looking for a way to manage your new auction property, you’ll find the Arthur rental property management software to be of invaluable assistance for managing your portfolio. With different access levels for owners, agents, contractors and your accountant, you’ll have all the information you need at your fingertips.
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