While you could go to your local estate agent and get them to handle your new house purchase like everyone else, another option is to go to a property auction. It’s not a method of house purchasing that is risk free, however. You should carefully consider the pros and cons before taking part and you certainly need to have the finance ready and available if you decide to go ahead.
The Advantages:
• You can get a property way below market value, as much as 20% in some cases
• Everything is done very quickly and completion takes place normally within a month – there are no delays because the owner is trying to buy another property, is taking part in gazumping or has any other issues that could scupper the sale
• There are no long drawn out negotiations beyond the bidding process on the day of the auction.
The Disadvantages:
• The number of homes that go into auction is small compared to the range you get from estate agents and online sites
• You will probably be looking at a property that will need renovation and you should factor this into the purchase price
• While the tight timescales can be great if you want to get things moving, they can often be troublesome if you have problems with financing
• There will be upfront costs such as solicitor and survey fees without the guarantee of getting the property you want at auction
• If you don’t have the ready cash available, getting financing can be difficult as many mortgage companies won’t get involved in speculative auctions.
At first glance, going to an auction to get a property seems like a great idea. Unless you have experience of these kinds of events though, getting it right first time can be fraught with danger. You could get carried away with the bidding process and end up paying more than you wanted, even more than the market price. You will also be up against hardened auction buyers who have greater experience and know when to bid and when to fold.
You’ll need to work with a good conveyancing solicitor who has experience of handling homes brought at auction. There will be charges from the auction house who handle the sale and the usual legal fees and once the hammer falls, you are responsible for insuring the property.
How to Buy a Property at Auction
We strongly recommend that you do your research and seriously consider carrying out a survey for any property that you are interested in – you don’t want to successfully bid for it and then find out that there are structural problems that will add greatly to your costs.
Most properties will come with a legal pack that contains information about the title deeds and local authority and environmental searches but you shouldn’t take these at face value and you should instruct a qualified solicitor to look at them.
Of course, you need to get all your finances in order and make sure that you can pay once you have won the bid. You will have to find 10% when the hammer falls on the deal and the rest within a month. If you can’t find the rest of the finance you will lose your deposit as well as the chance of buying the house and you will usually have to fund the resale. That could cost you a lot of money.