Ever watched something on TV where people pick up bargain properties at an auction and thought you’d like to do the same? You’re not the only one.
Ever watched something on TV where people pick up bargain properties at an auction and thought you’d like to do the same? You’re not the only one and so we’ve put together this summary of the key things you need to know before you jump in.
As you’d imagine, one of the main reasons people choose to buy homes at auctions is the opportunity to get a great deal. Often, houses that are up for auction have been repossessed and the banks just want to recoup their losses, but you’ll also find properties that have been left vacant after the owners’ death. In this case, whoever is responsible for the property often just wants it off their hands as soon as possible, and so they’re prepared to sacrifice profit.
It’s important to bear in mind that while you might be getting a great deal on the actual house price, auctioned properties are often in varying states of disrepair and require some work to make them liveable. You’ll need to factor those costs into your overall budget before you even think about placing a bid. However, even if the property you want requires significant renovations, buying a house at auction can be more affordable than going the traditional route – if you know what you’re doing.
Preparation is crucial
On the surface, buying a house at auction seems simple, but you need to do a lot of prep work to make it so. For starters, you need to find reputable auction houses that specialise in residential property auctions. Google can be your friend here as most auction houses have websites, or are at least listed in online directories. Failing that, you can always consult the trusty Yellow Pages or ask an estate agent for recommendations.
You then need to contact the houses (or subscribe to their mailing lists) to get a catalogue of properties available. This allows you to identify properties of interest, and then the real prep starts. For example, you’ll need to:
• Arrange to view your chosen properties. • Arrange for the requisite checks, surveys, searches and inspections (this is very important when it comes to applying for a mortgage). Sellers usually provide a professional property valuation, but it’s advisable to get one independently. It’s a good idea to consult a solicitor or conveyancer to find out exactly what the legal requirements are. • Work out a rough budget (including renovation/construction costs, legal fees, moving costs and stamp duty). Then decide on a price limit for the house itself. • Apply for a mortgage. It’s important that you have your financing sorted before the auction because you’ll need a 10% deposit as soon as the hammer falls, and you’ll need the remaining 90% within 28 days. It’s also important that you tell your mortgage provider that you intend buying property at an auction, so that the right arrangements are made.
We suggest that if you’ve not been before, you attend a few auctions before yours comes up. You can get a feel for the atmosphere (it can get very exciting and it’s easy to be carried away), as well as the bidding process.
On the big day
If your bid is successful, you’ll be signing a lot of legally binding paperwork. To ensure that it all goes off without a hitch you will need proof of ID (usually two forms are required, e.g., your passport and your driving licence), as well as your banking/mortgage details.
When you arrive, you will need to register as a bidder; otherwise it doesn’t matter how high you raise your hand, your bid won’t count. When you register you should receive an addendum sheet, which is basically an updated catalogue of all the houses for sale at the auction that day.
Use clear gestures or signals when you bid. Typically, firm nods or a raised hand will do. Don’t worry, you won’t accidentally buy a house if you scratch your nose – auctions are a little better managed than film and TV make them out to be.
Finally, remember that it’s not the end of the matter if the reserve price isn’t reached and the house is withdrawn from the lot. You can approach the vendor privately and make an offer. Sellers are often open to negotiation, especially if the day has not gone well.
Property auctions are great places to pick up fantastic deals on repossessed homes, but you need to keep your wits about you. Follow these tips and you’re well on your way to bidding like a pro.
Image courtesy of The Independent (www.independent.co.uk)
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