Buying Property At Auction

Home Buying

Buying property at auction is becoming more and more popular. The last ten years have seen a threefold rise in the numbers of property bought this way.

This applies to both commercial and residential properties. Properties are bought for investment, buy-to-let and also residential homes for the purchaser. However, it is important to be wary of the process if you are a novice at buying property at auction. You will need to make sure that you get the right advice to ensure that any potential investment does not become a financial burden. As always has been the case, property values can fall as well as rise. However, this said, the property market has seen a continuing rise for a considerable length of time now and. At the moment, despite scares to the contrary, any prospect of a general fall in property prices does not seem to be on the cards. It is important to keep up to date and constantly track any movement in prices and costs.

You will hear that the golden rule to ensure the maximum opportunity for success is to buy below market values and then sell on for profit. Buying at auction is one way of doing this but there is no guarantee of success. There are stories of people who go to auctions, buy a property unseen and make huge profits when selling on. This is pure luck and certainly not considered judgement. Buying an auction property without doing your homework first is extremely high risk and I certainly would not recommend it!
You will need to collect all of the relevant information on the properties you hope to bid for. This will include local searches, and a survey. When you buy at auction there is no opportunity to change your mind. Once the hammer comes down, that's it. Contracts must be signed straight away and you will be required to pay a 10% deposit and complete the purchase within 28 days of signing the contract. You must make sure that your finance is in place before you attend the auction. You will also need to instruct your solicitor and have had a survey carried out on the property before you bid.

Auctions can be infectious.
Fix your top bid and don't be tempted to go above it. You will need to have a disciplined approach to the whole process if you want to ensure success. If you are not successful the first time you bid for a property, don't worry, there will be other opportunities.

Auctioneers will provide you with a catalogue and price guide for each of the properties, usually about three weeks before the sale. You may have to pay for this - but don't worry. This is just the first and tiny part of your overall investment. Guide prices are just that, a guide. They are often conservative estimates that are set to 'temp' you bid. Expect the bidding to exceed this. Often there will be a reserve price too. If the bidding does not reach its reserve, the property will not be sold. Sometimes the auctioneer may be given some discretion with the reserved sum. In this case, a bid just short of the reserve price may be accepted by the auctioneer at his or her discretion. It may also be possible to approach the agent with an offer sum for the vendor to consider. You will usually need to have been bidding near the top bid to be considered for this.

It is also important to remember that if you are not successful with your bid for a property, you will forfeit any costs that you may have incurred. Your survey and solicitors fees will be lost.

Remember - not only are auctions infectious, they are not for the faint hearted.
Auctions can also be a nerve racking and stressful process. If you are new to property auctions, it is a good idea to attend one or two before you take the plunge so that you are more familiar with the process. If you do not want to attend the auction yourself, or if you want to remain anonymous, you can always have someone bid on your behalf. Your solicitor for example could attend in your place. You can also book a phone bid and even bid online at some auctions.

Because many properties will be in need of attention or refurbishment, a building society will probably want you to have the cash to pay for the refurbishment. For this reason you will find that most who buy at auctions are professional investors, builders and such like, but nowadays more and more owner occupiers are getting in on the action. However, provided you're careful, buying at auction can make good sense and may well be the best chance you will have to build up a property portfolio or take the next step up the property ladder.

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