How to buy property at auction
March 10, 2009
By Kevin Sexton
Finding the right property is hard enough at the best of times, if we factor in the market, mortgage, size of the property, Hips, likely bills, along with the location and all those other variables that make buying a home feel more like an algebra test, then its perhaps no surprise why so many people end up with a simple box on a typical estate. However, for those who are looking for something a little different perhaps you should consider buying at auction, not only do you widen the net in terms of how you can search for a property but you can also find properties in need of a little attention or something a little less conventional than your average surburban semi.
If you have never bought a property from auction before it can seem like a daunting prospect. Does the thought of the hammer falling as your bid is accepted sound just too much like a judge’s decision to sentence you to life imprisonment? But if you do your homework it can be an exciting and fun thing to do. Every year more than 35,000 properties are sold at auction, so there could be some great opportunities for picking up a bargain, particularly in the current market.
There are many reasons why a property may be sold at auction. It may have been repossessed, or inherited as part of an estate requiring significant alterations in order to be brought up to a standard required by vendors. Selling the property at auction is a good way of determining a fair price without widening the subjective input of several parties.
Whatever the reason, if you are interested in buying at auction then start now by going to a few property auctions just to get an idea of how it works. You can even mark on the lots beforehand what you would be prepared to bid and then see how much they sell for. This will boost your confidence for the real thing. But if you are still intimidated by the prospect it is possible to get another agent to bid for you (at a cost). The goal is to get the house that you want and remember that there are professionals out there to help you do just that.
I spoke to Bryan Baxter, the Director of Auction House, a property auction specialist, and asked him what advice he would give to someone buying at auction for the first time. “The most important thing”, he said, “is to take advice from the auctioneer, your solicitor and surveyor, and talk to people who have bought from auction”. He also advised if possible to go to open days or viewings and check out several properties rather than focus on just one.
I then asked him what preparation was needed before going to auction. He replied, “You need to obtain all of the legal paperwork which you will often find can be downloaded from the internet.” He stressed the need to have the finance to exchange contracts on the day of the auction, which would normally be 10% of the purchase price and to have the balance ready to be paid on completion, which, in most cases, takes place after 28 days. “But completion dates can sometimes vary,” he warned, “so this should be checked before the auction….this date should be contained within the special conditions of sale or can be provided by the auctioneer.”
I wanted to know what professional help and resources are available before buying at auction? “On most properties”, Bryan said, “a HIP (Home Inspection Pack) is made available along with an Energy Performance Certificate and special conditions of sale, so make sure your own solicitor receives all of these. Surveys are also occasionally available but generally cannot be made assignable to the purchaser, so it is a good idea to be prepared to make your own enquiries through your own solicitor or agent. We have just had a successful auction in East Anglia, with twelve of the sixteen properties sold during, and two after the sale, so the auction market is still quite buoyant and is an excellent way to buy or sell a property, especially in the current market”. There are several estate agents who market some of their properties through auction along with some dedicated auction houses. Many of these can be found on the internet and will send you a current catalogue on request.
You may find the following brief guide to the stages of buying at auction helpful.
Take a survey of the area. Once you have identified an area it is essential to view the property at various times of the day. Along with conversing with the neighbours will help you gain a general impression of the area and highlight any issues.
Consult a surveyor. This will give you an idea of structural faults and costs of repairs. Make sure you factor in the cost into the price you are willing to pay and allow a contingency of at least 10% for the unexpected.
Search for any issues. Carry out any searches, either yourself which can be done freely at the local council offices, or let your solicitor do the work. This will highlight any issues. There will be a Homebuyers pack but this will probably only contain the bare minimum to get the property sold.
Get your finance ready. A deposit of 10% is required to secure a successful bid at auction. You can prearrange a mortgage or bridging loan (expensive!). Completion is usually within 28 days so you need to ensure that you are able to complete within that time frame or risk incurring interest charges or worse still, losing your deposit.
Order a legal pack. If you know the property that you want, order a legal pack prior to auction and pass it on to your solicitor.
Don’t bid above your price. You will have a price that you can go to. Stick to it, no matter what, or you risk buying a property that you can’t afford and you may end up paying above the market value.
If you do your homework and keep your cool buying at auction can be very exciting, and you could end up with your dream home at a bargain price.
Resources:
Propertyauctions.com:http://www.propertyauctions.com/
Savills:http://62.105.94.133/lond_Current_auction.asp
Brown & Co:http://www.brown-co.com/auctions_residential/auction_calendar.php
Auction House - http://www.auctionhouse.uk.net
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