Auctions are a great way to avoid lengthy and uncertain buying procedures – but be warned: as soon as the hammer falls you're locked into paying, so be prepared.
Why buy at auction?
Buying a property at auction can be both exciting and substantially profitable. A property auction circumvents the lengthy buying procedure, and there’s no risk of anything falling through at the final hour.
Auctions aren’t just for experts with inside knowledge – over the past few years they’ve become increasingly popular with buyers who want to avoid the traditional housing chain (thanks in part to BBC’s Homes Under the Hammer).
Researching the property
Make sure you study the auction catalogue and make a shortlist of any properties that may be of interest. It’s worth going to view any properties you like the looks of before making any commitments at an auction. It’s advisable to take a builder or an architect with you to find out what can be done to the property, and how much it’s likely to cost.
You will regularly find that guide prices at auctions are set a lot lower than what the property is likely to go for in order to tempt bidders, so have at the front of your mind what you think the true market value of a property is.
Lastly, be sure to keep an open mind. Auction properties are often in a poor state, which is why you can get certain properties at a slashed price.
As the bidding increases, so will your pulse. But this is where you need to ensure you don’t get too carried away.
Before the auction, try to set a figure that you don’t want to exceed, and stick to it. Going over budget can be very tempting, especially if you’ve invested a lot of effort into the auction, but try to remain as close to your budget as possible. If you're unable to attend the auction, you can make a bid by telephone or in writing, but make sure to contact the auction house beforehand for more information.
If a property fails to reach its reserve price, don't give up hope. The vendor may decide to accept your bid later at the end of the auction. Make sure you leave your details with the auctioneer.
Come auction day you’ll need to have a 10% deposit to hand, and will be given a further 28 days to pay off the remaining 90%. If you fail to do so, you’ll lose the 10% and well as the property.
In addition, you’ll also have to pay:
- An administration fee to the auction house, which is usually between £200 and £300.
- Your solicitor
- Stamp duty
- Insurance on the property
At the end of the day, the thrill of having a bid accepted is a fantastic feeling, and if you’ve done all your research correctly, you could end up getting yourself a bargain.