If you’ve been considering investing in property but want to avoid the sometimes lengthy and time consuming buying procedures, you may consider buying a property at auction. If you’ve never ventured into the world of property auctions, check out the helpful guide to help navigate the exciting world of property auctions
Benefits of Buying In Auction
Auctions can be a great way to find unique properties that may not be listed on a property portal or with a high street Agent. Auctions are also becoming an increasingly popular option for investors who want to avoid the multi-step process of purchasing a home.
Buying at an auction eliminates the frustration of something falling through at the last minute. Once that hammer falls legal exchange takes place and the home is almost yours. There are fewer moving parts, which means less risk of a mistake costing you the sale.
Another perk of buying at auction is that you can see when and what other people bid, so you’re always in the loop about where you stand in regards to the sale. The auction process can be a lot more transparent than buying property the traditional way.
Downsides Of Buying In Auction
While transparency and saving time are two of the biggest advantages of buying at auction, it does have its drawbacks. It is common for investors to get caught up in a bidding war at auction. If you’ve already put money into the survey and other costs associated with researching the property, and then you don’t win it, you’ve lost money.
Another frustration that can come with buying a property at auction is doing all of the research on a home, putting money into making sure it is worth buying, and then finding out it has sold before it even gets to the auction. These are some risks you will have to take in order to take advantage of the many benefits of buying at auction.
Costs Of Buying At Auction
One of the first questions property investors have about buying a property at auction is how much it will cost them. Some of the most significant costs associated with buying a property at auction include:
Paying your solicitor/surveyor
Before you bid on a home, you need to conduct a survey to ensure the condition of the home. Surveys range from a basic home condition survey costing around £250 to a full structural survey from £600 or more.
Investors will sometimes have to pay a buyer’s premium, also called an administration fee. This is a fee that the buyer pays to the auctioneer, and varies depending on the auctioneer. Usually the fee ranges from £200-£300, but could also be a percentage of the purchase price.It is important to know what the administration fee is before you bid so you can factor that into your budget.
Finding An Auction
To find your first auction, first you must decide on the area in which you’re interested in investing. Liverpool is one of the hottest spots for property investing in the north, while Bath and Oxford are some of the popular areas to invest in a holiday home. Once you know where you want to invest, request an auction catalogue for the area so you are notified when properties go up for auction in that particular region.
There are usually only 3-4 weeks between when a property is listed in the catalogue and when the property goes to auction. It’s imperative that you have all of your documentation ready to go so you can act fast.
Preparing For Auction
The best way to be successful at an auction is to be well-prepared. The more information you have about a home and the auction process, the easier it will be. Some things you can do to prepare for your first auction include doing the proper research and carefully looking over the legal pack given to you by the auctioneer. The legal pack includes all of the necessary documentation associated with the house, including “the title deeds, local authority and environmental searches, fixtures-and-fittings list and a seller’s information form, along with any relevant leasehold information.”
Finalizing your finances is another important step in preparing to go to auction. Getting a mortgage agreed in principal before the auction starts will help expedite the process once you’ve won the bid. You’ll be expected to pay 10% of the home price as soon as the auction is over, and you’ll have 30 days to pay the rest. If you can’t complete the payment within a month, you will not only lose the 10% you put down, but also be responsible for covering the costs to re-sell the property.
On Auction Day
Auction day is an exciting day! When you’ve done the research and work beforehand, you can walk into auction day with confidence. It’s normal to feel nervous, but do your best to keep your cool. Remind yourself what you can afford and the absolute max you can bid. Then, be careful not to get caught up in the energy and excitement of the auction. If you don’t win this one, remember that there will be other properties and other auctions. You can increase your chances of a successful auction day by arriving early and having all of the required documentation.
Advice From Experienced Bidders
- Come dressed for business and bring a notebook with you.
- Try to sit at the front because this will show others that you take the auction seriously. Alternatively, you could stand, which might make you stand out from the crowd.
- When you speak, speak confidently.
- Instead of saying “300” say “£300,000”
- Don’t disclose how much you can actually bid or how much you are willing to pay.
In an age where you can do almost everything online, it is no surprise that property auctions are quickly moving to the online realm. This allows you to bid on a property from the comfort of your own home, 24 hours a day, seven days a week. At the end of the auction period, the person who bid the highest wins. To secure the property, you’ll pay a reservation fee, which is usually non-refundable. This is made as soon as the auction is over by by debit or credit card or bank transfer. This fee is usually at least 2.5% + VAT of the sold price.
Benefits of online auctions include:
- The entire process is transparent so you know exactly what you’re getting into.
- Homes at auction have already been on the market for a while, so they are priced realistically to sell
- Online auctions offer longer completion timescales
- Fixed dates for exchange and completion set by both sides, which expedites the process.
An auction is a great opportunity to expand your investment portfolio and try something new. While it can be a little intimidating stepping out of your comfort zone, approaching an auction well-researched and well-prepared can help you be successful.