With house prices rising all the time it could seem like a great idea to buy at auction. With rock bottom guide prices and some great bargains to be had, it is possible to get yourself a fantastic property if you’re willing to act quickly.
But if you’ve never considered buying at auction before, the prospect can be daunting. What is the procedure? What are the hidden risks? Is it really as easy as it seems?
Mike James, a property expert and writer working with George Ide, has provided the guide to exactly what you need to know before you consider buying a property at auction.
What are the benefits of buying at auction?
One of the major advantages of buying a property at auction is that you can get a house cheaper than those that are available from estate agents. While this isn’t always the case, there are opportunities to get excellent bargains.
You’ll also find that many of the properties that come up at auction are unique and different from the standard home. If you’re looking for something quirky, an auction can be a great place to get one.
It’s also worth noting that there is no chain with auction properties which can be one of the major frustrations when buying a home. Equally, the sale is agreed when the auction is completed so there’s no chance that someone can come in and offer more.
What are the risks?
It should be noted that like any auction – the environment might not suit someone who is either inexperienced or very competitive. It can be easy to get into a bidding war without realising how much you are spending. Constantly telling yourself “it’s only an extra…” can lead in you going heavily over-budget. Remember that once the auction is over, the sale is agreed, so you will be committed to that price.
Equally, you need to remember that the guide price often has little actual bearing on the value of the property you don’t really have any idea on what the realistic selling might be. That means that you can spend a lot of time, effort and money searching properties that actually turn out to be far beyond your budget. It can be somewhat demoralising to have your heart set on a property only for it to immediately fly past your budget.
There is often very little time between the time a property is added to an auction catalogue to the point where it is sold – weeks rather than months. This means that you have to be ready to act very quickly if you want to have any chance of getting the property. Ultimately this can feel like a rushed process and this doesn’t sit well with a lot of people who prefer to take their time and think about a decision.
Do your research properly
It’s absolutely essential to do your own research and take it seriously. As soon as you see a property come up that you like the look of, arrange a viewing with the auction house. You should treat this in exactly the same way as you would a house purchase through an estate agent – if you’re serious about buying somewhere, have a couple of visits.
One important difference is that you should have a survey carried out and this should be done before you buy. Remember that you are committed to the purchase as soon as the hammer comes down so if you later have a survey that finds structural problems you will have to lose your deposit if you want to pull out of the sale.
As was mentioned before, you can ignore the guide price. They are set deliberately low to attract more interest. It is also a very sensible idea that you should watch a few auctions first, if you’ve never bought at auction before. That process can be very worrying, so here are some tips for how to deal with it.
How to deal with the auction
The first thing to say is that you need to set a budget and stick to it. As mentioned before, it can be very tempting to start to gradually increasing the amount you’re willing to spend and then suddenly you’re hugely over-budget and committed to spending more than you planned.
Arrive early at the auction and find a good spot in the crowd where you can be seen by the auctioneer. You need to make sure you have two forms of identification with you – for example a passport and a driving license.
You’ll need a specialist solicitor
Finally, it’s important that if you want to buy at auction, you have a solicitor experienced in dealing with this kind of property. Standard conveyancers may not be especially familiar or might lack the expertise to give you complete peace of mind.