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The benefits of buying at auction
Buying at auction is exciting and potentially rewarding if you can bag the property you want at a bargain price but it is also a frightening and potentially expensive experience for the unwary. If you follow these tips you will have at least a fighting chance of coming out on the right side.
Finding an Auction
Property auctioneers often cover a wide geographical area so you may have to travel to find one with properties to sell in your area. Local agents will be able to give you details of upcoming auctions but also keep an eye on the local press as they are normally well advertised. A good idea is to register with EIG (eigroup.co.uk) who will alert you to properties coming to auction within your specified requirements. Property listing sites such as Rightmove Zoopla etc. hold details of properties to be sold at auction.
Choosing Your Property
Several weeks before an auction a catalogue will be available with indicative guide prices. Get a copy as early as you can and view those properties that make most appeal, then obtain the legal pack and make sure that you study it carefully and take legal advice on any aspect about which you are unsure. It really is essential that you understand every aspect of the legal small print because your carefully constructed financial plan can be completely undermined if there are legal constraints that prevent you doing what you planned or impose additional charges that you didn’t anticipate.
Take with you everything you need to make a thorough examination of the property (torch and ladder for example) and take photos of anything that you will need to fix so that you can refresh your memory later. Unless you are a builder take a friendly one with you. Many properties placed at auction have been left empty for some time and are often in very poor repair so a diligent review of both the inside and out is essential. Look out for signs of damp, wood rot, leaking roofs and structural damage which might be very expensive to put right.
Sort out Your Finances before the Auction
If you make a successful bid you will need to pay a 10% deposit on the day so ensure that you have the necessary cash available and check how the auctioneer will require the deposit to be paid (most take debit cards and cheques).
If you need a mortgage then make sure that you have an offer in place.
Get a solicitor who is experienced in dealing with auction purchases on standby as you will need to move quickly if your bid is the winner.
As you will become liable for any damage to the property immediately sort out insurance in advance so that you can bring it into effect as soon as your deposit is accepted.
REMEMBER that you are legally bound once your bid is accepted and the deposit paid. If you rely on a mortgage which doesn’t come through in time then you may lose the property, forfeit the deposit and be liable for potentially expensive financial penalties.
On the Day
Phone ahead to check that the property you want is still available.
If it’s your first time then get there in good time and sit through a few other sales to see how the process works.
Make sure that you have set a ceiling on your bid and don’t exceed it.
Make sure you have the finances in place and can pay the deposit within minutes of your bid being accepted.
If you are unable to attend in person you can bid by phone or by proxy which means the auctioneer bids on your behalf up to you specified maximum bid.
Reserve Price Not Met
The sellers will normally set a minimum price and the property will be declared “no sale” and withdrawn from the auction if this price isn’t met. This can sometimes be an opportunity for you to negotiate with the auctioneer and seller to get a price lower than the reserve but still within your budget so it may be worth a conversation after the event to see whether you can secure a good deal.
After the Event
Completion is normally required within 20 days so your solicitor will need to work quickly to ensure that all the legal stuff is in place. You will also need to get the full purchase price together within that time span.
No chance of being gazumped; no agonising wait to exchange; no onward chain, no worries that the seller may pull out, hopefully a competitive price and the whole exercise complete within 20 days!