One of the most decisive and fastest way to buy a property is to buy it at auction. There are over 1,000 property auctions in the UK every year and they sell over 25,000 properties. If you bid for a property at auction (and the reserve price is met), once the hammer falls then a binding contract for you to buy the property has been made. You usually have to pay a deposit of 10% prior to leaving the auction house on the day which cannot be by credit card or cash, with the balance of the payment due within 28 days.
If you are looking to buy a property at auction it is worth going along to an auction locally just to watch what happens, before taking the plunge. They can be daunting at first but if you take the time to familiarise yourself with a property auction and its procedures during a ‘live’ auction first then it will be less of a challenge when you do it for real..!
Before you go to the auction, it is absolutely essential that you do your homework beforehand. Make sure that you have your finances in order so that you can actually pay for the property when required to do so. It is almost impossible to arrange a mortgage in time so you will have to be in a position to stump up the balance !
Do your homework – find out what similar property has sold for recently in the street, find out what they are currently for sale for, and look to see if the property you are interested in buying at auction has been advertised by an estate agent locally prior to being offered for sale at auction. By looking at all these costs you can set yourself a limit. Setting a limit is of the utmost importance to ensure that you do not over pay for a property.
Do not go into the auction with the misconception that everything bought at auction is a bargain
On the day of the auction there may be several bidders all after the same property and the excitement of the day, the thrill of the chase, may mean that the property is being sold for more than its true value. If this is your first time in an auction house, remember, the people you are bidding against, it may be their first time as well so don’t assume you are competing against seasoned professionals and getting a bargain.
So, the setting of an limit is of paramount importance and you need to take a regular reality check on what your plans are and do they make financial sense. Remember, a property investment is exactly that – an investment. You are doing it for the money, for the return only – don’t let emotions get in the way as they have a nasty habit of costing you money…!
Why are the properties auctioned and not sold at estate agents ?
Very often properties sold by auction are ones which may be unsuitable to sell from a local estate agents window. Most people buy a house for their own occupation and will obtain a mortgage to enable them to do so. At auction you will very likely not be able to arrange a mortgage so will be a ‘cash’ deal. So the property sold at auction may often be unsuitable for a mortgage in its current condition. It may need complete renovation, it may have a sitting tenant, it may have structural problems making it unsuitable for the ‘average’ mortgaged homeowner. Or, simply, it may be a repossession and the lender wants their money back as quickly as possible and selling at an auction is often the quickest way of doing so.