Buying at Auction Explained
Auctions are a fast way to buy a home. However, buying at auction can be a risky business. Find out how and why in In-Deed’s detailed guide to buying a property at auction.
Buying a property at auction is often a way of picking up a bargain. There’s no commission to be paid to an estate agent, no gazumping and you will usually complete your transaction quickly, avoiding the often-drawn-out process of a conveyancing purchase. Auctions are a fast way to buy a home. However, buying at auction can be a risky business. Find out how and why in In-Deed’s detailed guide to buying a property at auction.
Okay, so you’ve religiously watched every episode of Homes Under The Hammer and you’re convinced you’re ready to rock up to the auction house and seal the deal on the bargain of the century. But hold on. It’s time to do your homework on what buying at auction involves and that means doing some proper research. Get along to your local auction house and watch the action several times so you know what’s involved and get a feel for how prices move from the listed price to the sold one. Once you’ve seen the auctions in action and are ready to get involved, request the catalogue from the auction house and scour it for any places that pique your interest. Buying a property at auction is exciting and potentially very profitable, but there are pitfalls to avoid.
Once you’ve looked at the catalogue and identified a potential purchase, you should arrange a viewing. And, as with buying any property, try to go and see it more than once. Once a property has been listed for sale, it usually goes to auction within 30 days. Auction properties are often in a poor state of repair, so if you’re really keen, consider having a survey of the property done beforehand that will reveal any potential problems or hidden issues. You must arrange this through the auction house.
Yes. The most important thing to remember is that once the hammer falls, that’s it – you will exchange contracts to buy the property and enter into a binding agreement to complete the purchase, usually within 28 days.
An auction property is rarely in walk-in condition, often having lain vacant for a long time and in dire need of an upgrade of kitchen, bathroom or décor – and often all three. But if you can see past the Seventies’ flock wallpaper and a grim bathroom that’s seen better days and are determined to buy, you need to talk to your solicitor next. When you’re buying at auction, you must have instructed a solicitor beforehand. In-Deed makes the legal side simple by providing a fixed legal fee and direct contact with one of our carefully selected and dedicated property law firms who will assist you throughout.
Ask the auctioneer for a copy of the legal pack. You need your solicitor to look over this information, while you too should read it carefully. In-Deed can offer reviews of an auction legal pack, but do allow a two-week time frame for your solicitor to do the job. Ask for details of this service when you call. The legal pack will advise on the title of the property, including any obligations you might have, for example, paying ground rent to a freeholder. The pack will also contain the local authority searches on the property and include any recommendation that additional property and land searches be carried out.
Be prepared for expensive legal costs when you buy at auction because you have no guarantee that you will win or even bid on a property. However, don’t skimp on instructing a solicitor and having searches carried out because if you don’t invest in the right legal advice, you could end up with some nasty, expensive surprises after the auction.
For example, anyone who pulls out after making a successful bid at auction will lose their deposit while the vendor can take you to court to recover any financial losses. Do have the full searches carried out beforehand and follow your solicitor’s advice.
You must have your finances in place before the auction so you know exactly how much you can afford to spend. When you’re buying with a mortgage, meet with the lender well before the auction and have your mortgage offer in place because you need access to the funds on the day of the auction. You may need to work with a specialist lender as many mortgage lenders will not lend on an auction property.
Choose your bidding limit before the auction starts. Auction houses are filled with adrenaline as bidders compete for a purchase, and it’s easy to go over-budget quickly and without thinking of the consequences. When you’ve invested time, effort and money into buying at auction, you don’t want to throw it all away in one reckless moment. Over-bidding can cost you thousands if you’re not careful. Know your limit!
Auctions can be bewildering and more than a little intimidating to newcomers. Make a couple of visits beforehand to get a feel for what goes on. On the day itself, get there early to register and get a seat where you can see the action. To register, you need two types of personal ID, proof of address and your solicitor’s details. Pick up any “addendum sheets” produced by the auctioneer. These sheets include any amendments and additional information to the listed properties.
Don’t forget your chequebook or bank or debit card to pay the deposit.
Get a good seat where the auctioneer can see you and is aware that you’re bidding. Don’t worry that any fidgeting or shuffling or scratching your ear will be confused with a bid. The auctioneer knows how to spot a real bid. To bid, gesture clearly at the auctioneer by nodding your head or raising your hand. Many auction houses will give you a numbered paddle that you simply raise to make a bid.
Some properties have a reserve price that must be reached. When a property you are interested in doesn’t reach its reserve price and is withdrawn from sale, you can still negotiate a deal between you and the seller, with the auctioneer acting as the agent. This is often the best way to pick up a bargain.
Once you’ve made a successful bid, you will be asked to sign the contract to purchase the property and pay the deposit. Give the auctioneer the details of your solicitor and then notify your solicitor of your successful bid. They will then take over the conveyancing process on your behalf.