Purchasing at auction is a great way to bag a bargain renovation project.
There are some incredible savings on offer if you’re prepared to take the risk and buy a property at auction.
Here’s our top tips on how to buy a bargain property at auction
1. Find an auctioneer
The first step is to find auction houses that sell properties in the areas you’re looking in.
Make sure they are regulated property auctioneers and then get on their mailing list for property catalogues.
Each catalogue should be available a few weeks in advance of the auction.
2. Finding fair value
Research the local housing market before the auction so you know how much the property is worth. Then decide on your maximum bid beforehand.
Once you decide on this price STICK to it.
Too many people get carried away at auctions and bid higher than they planned – or what the property is worth.
A good way to avoid emotional bidding is to get someone to bid for you, or bid by proxy, where you authorise the auction house to bid on your behalf up to a specified limit.
3. No backing out if you are the buyer
If you are the highest bidder, you cannot change your mind after the fall of the hammer and you must pay for the item.
This isn’t eBay, where people change their mind after buying items online.
If you pull out of the sale at auction, you could face huge costs, or be taken to court, so only bid if you are 100% committed.
4. Read the small print BEFORE your bid
This is the most important piece of advice… check the terms and conditions of the auction house you choose to use – by entering a bid you are agreeing to them.
You will be required to pay the deposit and any administration charges immediately, as well as the balance of the purchase price usually within 20 business days, so you should familiarise yourself with what needs to be paid, and when, so you don’t face any unexpected costs.
Make sure you are fully aware of all your costs BEFORE you enter the auction.
Legal documents for each lot should also be available to download from the auction house’s website.
Read them carefully and send them to your solicitor, as they could affect how high you bid and if you bid at all.
Searches are often included in the legal documents, but if they’re not, ask your solicitor to do them before the auction, although this could, of course, be a waste of money.
The same applies to a survey – if you don’t want to pay for one on a property you may not buy, ask a good builder to view the property with you.
Houses and flats being sold at auction often require modernisation, and not being aware of the full extent of the work required could prove very costly.
5. What you need to bring on the day
Before the auction, check what ID you need to register to bid and what methods of payment are accepted for the deposit.
If you’re the successful bidder, you’ll have to exchange contracts and pay a deposit (usually 10% of the purchase price) and a fee to the auction house immediately.
The completion date is often four weeks from the date of the auction, but it can vary.
If you fail to complete on that date, you could lose your deposit and even be sued by the seller.
For this reason, paying cash is a much safer way to buy property at auction than with a mortgage.
6. Missed out?
The guide price is the price the auction house expects the property to sell for, but properties often fetch much more.
Lots will usually have a reserve price and only the auction house knows what it is.
If the bidding doesn’t reach the reserve, it may be possible to do a deal with the seller, via the auction house, on the day or after the auction.
You can check online after the auction to see which properties didn’t sell – it usually says the price they’re available for.
You may also be able to buy a property before the auction, but many sellers will refuse because they know prices can leap up in the heat of the moment.
If you would like us to help you find funds for a below market value property just contact us here.