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Preparing To Buy Property At Auction

With property prices rising, a growing number of people are looking at new ways to get onto the property ladder. Buying at auction can pay off as many people secure a property for 30% or more less than its open market value. Many properties at auction are simply those that have been repossessed for non-payment of mortgage or bankruptcy reasons, they are often in a perfectly reasonable condition.

However, property auctions are not for beginners or the faint hearted. It is true that you can get a fantastic property at bargain prices but if you make a mistake, you can end up paying a huge amount for a lot of problems.
Buying a property at auction is easy and very quick. No last minute haggles if the seller changes his mind on price. Once the hammer goes down it yours - contracts have been exchanged. You will agree a completion date then and there at the auction.

Don’t seek to buy at auction if the purchase is dependant on another property which has not exchanged contracts.
You need to find the right property - make a list of ‘must haves’ to reduce your search. Your ‘must haves’ may be a particular location, type and size of property etc.

Once you know what it is you want you can start your search. Use the internet, auction catalogues, (get on the mailing list of the auctioneers) local press, national press, property supplements, even driving around if you know the area you want!
Remember if you buy a tenanted property you will receive income from the day of completion.

Before The Auction

Before you go to the auction to buy make sure you have covered the following: -

• Always visit every property in person, and more than once even some of the most experienced developers will walk every inch of a site before buying, so they don’t get any surprises.
• Have a professional survey completed – you will need this if you are getting a mortgage and if you have cash to buy you need to check if the property needs any investment. Use a charted surveyor The RICS home buyers report is a good option
• Find out the prices of similar properties in the neighbourhood and always try and find out the recent history of the property and local area. Often the property will have been offered for sale with the local agents before being put up for auction.
• If the property needs redevelopment, get quotes from builders etc before the auction to assist with your budget planning
• Get a formal mortgage offer before the auction
• Investigate short term finance and draw down options
• A deposit – usually 10% will be required on the auction day
• Make sure you have appointed a solicitor. Some properties are offered with a “solicitors pack” which gives basic search information, however many experienced buyers will instruct a solicitor to carry out their own searches and identify problem areas, it can be money well spent!
• Make sure you have seen and reviewed the legal documents from your auctioneer before the day
• The catalogue forms part of the contract on the day – you must have it with you
• If you want you can offer before the day – if your offer is accepted the property will be withdrawn when contracts have been exchanged.
• You should check buildings insurance cover - because as soon as the hammer goes down it will need insurance – not always the case for leasehold properties – check with your solicitor
• Look at the results of previous auctions in the area, you can get a good feel for the strength of the marketplace, it will give you a good feeling for what you are likely to have to pay, try to be realistic when comparing properties.

Costs and Finance

• You will need to budget for legal and professional fees
• Consider a budget for improvements to the property
• Don’t forget stamp duty
• Most auctioneers will charge a contract documentation or buyers premium fees usually around £150.00 +VAT
• Temporary finance is worth considering there are lots of short term finance options available
• Take the guide price suggested by the auctioneer with “a pinch of salt” as it is normally set low to attract bidders.
• Don’t assume you will get the property for that price.

On The Auction Day

• Check the property you want is still available on the day before you set out.
• Try and arrive early space is often limited, listen for any announcements and amendments.
• Remember when the hammer falls you have exchanged contracts, the contract is binding and the property sold.
• Remember to bring with you: -
  • 2 forms of ID, proof of address, and bank details
  • The auction catalogue
  • Your solicitors details
  • The deposit for the property – (usually 10%) this can be bankers draft, building society cheque or a personal cheque
  • Buildings insurance policy contact details
• Don’t worry you can’t buy at auction by blinking your eye – you must raise your hand or the catalogue to make a bid.
• Once the final bid is in, the auctioneer will say ‘going going gone’ before banging the hammer down to close the sale.
• If the property doesn’t sell it will be withdrawn from auction and the auctioneer will invite people to discuss with him after.
• Remember what your budget is, and stick to it – it is easy to get carried away! The golden rule of buying at auction is to set your maximum price before the auction, it is the auctioneer’s job to try to create excitement and push the bidding up. Professional buyers have done their homework, know what the property is worth and set a limit before the auction.
• If you can’t make it on the day someone else can stand in for you - you will need written consent. Also the auctioneers may be able to bid for you. Make sure you are clear about your budget!
• You can also arrange to telephone in whilst the auction is going on and place your bid – ask your auctioneer for details on how to do this.
• The completion of the sales takes up to 28 days - you will need to pay the balance of the sale price on completion.
  

Buying at auction can be an exciting and enjoyable experience, if you do your homework and go to the auction prepared you can be sure you wont regret your day at the auctions.