Buying at Auction
Buying a home at an auction can be cheaper than other traditional routes. Prices are usually very competitive and often cheaper than on the high street. Auctions, wherever their location, can contain properties (but also attract buyers) from all over the country. Properties can be much more varied than in the high street, with unique properties that are difficult to value, repossessed homes needing a quick sale and any unusual property that might be difficult to sell through normal channels.
- Finding property for sale at auction: Property auctioneers can be found through business directories, advertising in local papers or by an online search. Find out auction dates, which are usually planned well ahead and request a catalogues of properties, including guide prices and floor plan. The auctioneer acts as an agent for each seller. They prepare the catalogue, from information supplied by or on behalf of each seller. They will usually have a photograph of the property, a brief description and a guide price. Go through the catalogue carefully, read the details thoroughly and identify the properties you are interested in.
- Viewing a property. If there are any properties you may be interested in arrange a viewing. You should not under any circumstances bid for a property you have never seen. If you are unsure of the condition of the property take professional advice. Buying a repossessed home can present problems. The previous owner may have had bad credit, which by mistake could show up on your records as you are moving into the same address. For a small fee it is worth checking to see if this is the case with a credit referencing agency so that any such mistakes can be corrected.
- Arranging Finance: before bidding at auction you need to make sure you have your finances totally organised prior to auction day. A successful bid is legally binding the moment the hammer drops. Around 10% of the price is required up front at the auction, with the rest within 28 days. You should not bid at an auction if you have not yet received a mortgage offer or the sale of a home has not been completed. When approaching mortgage lenders it is vital you let them know you intend to buy at an auction. You could lose your 10% deposit if you fail to complete within the time given (normally within 20 working days). If the property is offered for sale again and reaches a lower price than when you bought it, you may even be sued for the difference.
- Get a house survey: Your mortgage lender will require a valuation or survey before the auction to verify its guide price. It is advisable to commission a full structural survey for properties in need of a lot of renovation work. Occasionally auctioneers will produce their own pack of information, including a survey, but it is still advisable to commission your own.
- Take legal advice: Consult with a solicitor before the auction. When buying at an auction much of the conveyancing work takes place before the auction. This includes carrying out checks, such as any legal problems with ownership and planning applications in the area. Make sure any major renovations have planning approval. Many unusual investment opportunities crop up at auctions, such as church or barn conversions. To avoid disappointment it is vital to check the planning status of a property and whether there is planning permission for planned changes.
- Set your house purchase budget: and stick to it!: It is important to take into account a number of other costs when deciding how much to bid, including building work, solicitors fees, stamp duty and moving costs. Sometimes a bid can be accepted before an auction takes place. This happens when a property is listed as up for auction, "unless previously sold". Selling at an auction incurs fees for the seller and they may prefer to sell beforehand.
- Auction Day. If possible, arrive early and familiarise yourself with the empty auction room. On arrival, get a copy of any addendum sheet. These are distributed around the auction room and contain late information or alterations. Arrive at the auction with two documents proving your identity and a banker's draft or building society cheque for 10% of your top price. The auction house will refund any difference if the property sells for less.
- When arriving you need to register. Some auctioneers will give a number to hold when making a bid, but in most cases holding up a hand or catalogue is acceptable. Bidding can also take place by telephone, by your solicitor in person and online. Check with the auction house for details about alternative ways to bid. Bidding will start below the guide price and move usually in multiples of £5,000, or £1,000 if bidding slows down.
- It's easy to get caught up in a bidding war. Remember your maximum limit and stick to it. If a property fails to reach its reserve price, don't give up! The vendor may decide to accept your bid later at the end of the auction. Make sure you leave your details with the auctioneer. This is often a good way to pick up a bargain, as a vendor might have been chancing their arm with their reserve price, but could be willing to do a deal after the auction.
- Making a successful bid. You will be successful if you are the highest bidder when the auctioneer's hammer falls. Then you will be required to hand over your deposit, proof of identity and solicitor's details and will be given a legally binding contract, with the remaining sum due within 28 days. Don't forget that the property becomes the buyer's insurable risk as soon as the hammer falls. The conditions assume that the buyer has acted like a prudent buyer.