The benefits of property auctions<\/h3>
A major benefit is that you can buy a property quickly as there is a fixed timescale. You have to exchange contracts and pay 10% of the price as a deposit on the day of the auction and the purchase must then complete within the next 28 days.<\/p>
You can’t be gazumped, there is no property chain and you’ll know everything you need to know about the property beforehand so it’s guaranteed to be yours within 28 days of the auction.<\/p>
The process and timescale for online auctions is different. If you win the property you pay a non-refundable reservation fee straight away, which could be 2.5% plus VAT of the sale price or a minimum of \u00a35,000 plus VAT (\u00a36,000), but don’t have to exchange contracts immediately. You then usually have 56 days to exchange and complete.<\/p>
You’ll often find more unusual properties for sale at auction or ones that need to be sold quickly \u2013 because of repossession<\/a> or bankruptcy for example. This is why you are more likely to find a bargain. And if you’re looking for an investment you can even find buy-to-let properties for sale that come with tenants, so you can get instant income.<\/p> The auctioneer provides a legal pack for each property containing most of the documents you need to decide whether you want to buy it, so your solicitor or conveyancer doesn’t have to do this for you. This includes the title deeds, the seller’s information form and fixtures and fittings list, local authority and environmental searches and leasehold information if relevant.<\/p> You can also get reassurance about the property’s value by seeing what others in the room are willing to pay.<\/p> Once you make the winning bid you are committed to signing the contract there and then, paying your 10% deposit and taking out buildings insurance<\/a> (which will be a condition of lending if you are buying with a mortgage). If you pull out after this you’ll lose your deposit. You then only have 28 days to get the rest of the money together.<\/p> If you are outbid you’ll have lost the money and time you spent researching the property, getting a survey done and viewing it. It could even be sold before the auction happens. There’s also the potential to get carried away on the day and end up paying too much for the property.<\/p> Contact auction houses in the area you want to buy in to ask for their catalogues of properties in upcoming auctions and subscribe to their mailing lists; details are also available on their websites. There’s usually a month between the catalogue being published and the date of the auction.<\/p> Alternatively you can visit the Essential Information Group or UK Auction List websites to search for properties for sale at auction. Property portals such as Rightmove and Zoopla will also indicate when a property is being sold at auction.<\/p> It’s not compulsory for auctioneers to be trained or regulated so choosing an auctioneer that is a member of a scheme like NAVA Propertymark will give you extra protection. They will have to follow an industry code of conduct, you’ll have a means of redress if something goes wrong and your money has to be protected in a designated client account.<\/p> As with any property purchase, you can pay for it all in cash or with a mortgage but you’ll need to have your finances in place before the auction. You should get a mortgage agreed in principle<\/a> with a lender beforehand, which will confirm that you are likely to be accepted for a mortgage and for how much.<\/p> You’ll need to have 10% of the sale price (or enough for the reservation fee if it’s an online auction) available to pay on the day of the auction if you’re successful.<\/p> Bear in mind that in most cases you’ll also need to pay the auctioneer’s administration fee, which will be hundreds of pounds, and there may be other fees to pay that will be listed in the property details. Learn more about financing a property at auction<\/a>.<\/p> Another way to finance a property at auction is by using a bridging loan<\/a> (sometimes referred to as a buy-to-sell mortgage<\/a>). Bridging loans are suitable when you’re purchasing a property with the intention of selling it on again soon afterwards (known as property flipping<\/a>), or if you’re buying an uninhabitable property that you wouldn’t be able to get a traditional mortgage on. <\/p> Bridging loans are a short-term finance option, so interest rates are usually expressed on a monthly basis rather than annual. <\/p> Research what properties tend to sell for in the area you’re buying in and what the rental market is like if you’re planning a buy-to-let investment.<\/p> Auction properties are advertised with a “guide” price but this is likely to be less than it will actually sell for and may go up before the auction if there is a lot of interest. There will also be a “reserve” price \u2013 the minimum the seller will accept \u2013 but this won’t be disclosed.<\/p> Once you have identified properties you’re interested in arrange to view them in person. You could even take a builder or architect with you to discuss what work you might do to them and how much it would cost.<\/p> Examine the legal pack for each one and ask your solicitor or conveyancer to look over it. Arrange a property survey to find out about the condition of the property and whether there are any potential issues that could be expensive to fix, even if you’re buying a rundown property to renovate. Decide the maximum you are willing to pay. If you’re really interested in a property you can make an offer before the auction but it will need to be a strong one.<\/p> It’s worth sitting in on an auction or two without bidding to get a feel for what it will be like.<\/p> If you’re bidding in person, get there early so you can register, get a good spot in the auction room \u2013 aim for near the back so you can easily see the other bidders but make sure the auctioneer will be able to see you \u2013 and consider any changes to the property information or guide price available before the auction starts. You’ll need to show two forms of identification and proof that you’ll be able to afford the 10% deposit.<\/p> During the auction itself stay calm, stick to your budget and make sure your bids are clear. If the bids in the room don’t reach the reserve price and the property remains unsold you may still be able to buy it privately immediately after the auction, so stick around.<\/p>The downsides of property auctions<\/h3>
How to find auctions<\/h3>
Financing an auction purchase<\/h3>
Compare bridging loans and rates<\/h3>
Preparing for the auction<\/h3>
Tips for auction day<\/h3>