Buying A House At Auction – Top Tips
If you’re looking to grab yourself a bargain by buying a property at auction but you’re new to the bidding process then don’t miss our top tips below:
Finding properties for auction
With over 35,000 properties going to auction every year, offered by hundreds of auction houses nationwide it’s important that you do your research to find your perfect property. The best source of information I’ve found is the Essential Information Group’s website www.eigroup.co.uk which covers the whole of the UK and is recognised as the industry standard for auction information. Alternatively you can search the local and national press, order catalogues from your local auction houses and search through property portals.
View the property
Once you’ve spotted a property that interests you, it’s vital that you go to see it. There are so many things that could affect the property which won’t necessarily be contained within the written details you have access to – noise, smells, neighbourhood, how much work really needs doing etc.
Get an expert’s opinion
The auction catalogue contains all the information regarding the sale, such as guide prices, viewing times and any special conditions of sale. You should appoint a solicitor to apply for and check the legal document pack which includes the searches but no in-depth survey or valuation.
In addition to a solicitor it is well worth considering the services of a surveyor to check the structural condition of the property before the auction – this is especially important if the property is old or in need of modernisation/renovation. The cost of this will be somewhere between £300 and £1500, depending on the level of report you want but in the long run it could save you £1000’s. You wouldn’t want to buy a lemon!
Finally, if you intend to do any major works to the property then you should get a builder to take a look and give you an idea of the costs and practicalities. Many reputable small building firms will provide this “walk round” service for £100 to £200 which many will discount from their final bill if you buy the property and give them the work – When it comes to property and builders there’s always a deal to be done so don’t be frightened to ask!
Before you bid you must be sure that your finances are in place. If you’re successful as the highest bidder you’ll be expected to pay a 10% deposit straight away and the remaining 90% on completion, usually 28 days (or 20 working days) later. Check the conditions of sale though as it is not unusual for a 14 day completion to be specified.
If you are borrowing money from a lender then you must get an offer of mortgage and their agreement to the strict auction deadlines before you bid. If you are unable to complete on time you will forfeit your deposit.
Know your limits
Buying a property, whether its for your home or an investment, is perhaps the largest financial investment you will make in your life. It’s easy to make rash decisions and get carried away in the heat of the moment if it’s a property you really want. Have a strong word with yourself before bidding starts, set yourself a limit and never ever exceed it – you may regret it if you do!
Auctions are not for the faint-hearted. With bidding on each lot lasting an average of only a few minutes, once bidding on your property commences, you will have little time to consider things. There is no hard and fast formula to making bids – whether you should start the bidding or wait for someone else to show an interest first, whether to go in high in the hope of scaring off your competition or start very low in the hope that there won’t be much competition – each strategy has its merits. Be advised that the guide price is not necessarily an indication of the property value but more of a reserve price. Lots will often sell for well above the guide price and not usually below.
My advice is to go to an auction or two ahead of time to observe – get a feel for what the process is like and formulate your own strategy – this will give you confidence when it comes to your auction!
If the hammer falls and a property has failed to sell, which happens when the lot does not meet the reserve price, the vendor will be on the back foot. Speak to the auctioneer afterwards to see if you can nab yourself a bargain!