With hit shows such as Homes Under the Hammer, buying property at auctions has grown in popularity over the last decade. This post will hopefully help you avoid sudden bankruptcy and help you buy objectively with confidence!
1. Familiarise yourself with an Auction House
An Auction house is a sales room, as such, it can be both intimidating and exciting. With so much to gain and lose, spur of the moment purchases are rarely successful. A winning bid can secure you your dream property, but at what cost? Knowledge of how the bidding unfolds, how prices rise and in what increments is essential.
Request the catalog and understand what properties going under the hammer. Once a property piques your interest, arrange with the auctioneer to view – before the auction. This is likely to be an accompanied viewing.
The auction listing in the catalog should guide you on the state of the property. Often, auctioned properties need work, so it might be wise to take your appointed surveyor with you.
3. Know the true market value
With guide prices set low at auctions, it’s important to research the property, the community and other properties that have sold previously in the region you are buying. Guide prices of properties are set low at auctions to entice in bidders. At this point, true market value means very little so knowledge of what the value of the property in peak condition is crucial.
4. Obtain legal advice
Get a legal team in place – a legal pack is issued by the auctioneers before each event. Key areas to cover are freehold, how long is the lease, is planning permission approved, other dwellings being built nearby?
Various things to consider - You will also need to make your financial arrangements known prior to the auction. You must have a 10% deposit ready on auction day, and you must deposit the remaining 90 per cent within 28 days. If you need a mortgage, it is prudent to have discussed all the financial implications with your lender, and have arranged a mortgage in principle. Therefore, as we mentioned before the surveyor will be important for the lender (if required) to agree to release funds.
Have a fee for the property you are bidding on in mind and stick to it. Remember auctioneer’s fees on top need to be added after the gavel drops. The fees vary from auctioneer to auctioneer, so have this in mind and ask what these are being bidding commences.
If the property meets and passes the figure you have in mind and have budgeted for, walk away.