Buying a home at auction – what to look for
If you are just getting started on buying your first home, or you need to buy another home quickly because of commitments like a job change or an increasing family size, you’ll no doubt start by looking at particulars from the local estate agents or carrying out searches using any one of the property portals that are available.
Nailing down your requirements will help to filter out all of the least likely candidates before opting to go and visit them to see if the credentials in the estate agent’s particulars match up to your imagination and expectations, before starting the long journey through the legal process before you can take ownership.
But have you ever considered buying a property at auction?
Why buy at auction?
You might have seen the property shows where the cameras follow participants from the day of the auction through to the renovations and pitfalls they experience on the way – particularly with a focus on whether their efforts have added significant value or not.
It’s true that auctions are not for everyone, and will take more nerve to get what you want, but there is a very real chance of picking up a bargain, particularly if you’re willing to put in the work.
What types of property come up at auction?
The types of property which are usually sent to auction are those homes that require more than the expected amount of renovation work to be completed, properties which are derelict or are uniquely constructed in some way, or are simply plots of land (with or without planning permission already granted). These are best placed for auction since these appeal to cash-buyers and investors looking for the speed of turnaround. Within the listings of the properties for each auction, you might find a tired but structurally-sound home that just needs a bit of your care and attention to bring it up to the level you want.
How does buying at auction work?
The biggest difference between buying a standard property through an estate agent or via an auction is that you are entering into a legally binding contract with the seller as soon as the hammer falls on your winning bid – essentially, you will be entering directly into the exchange of contracts stage, with completion following quickly behind. It’s for this reason that you need to line up your documentation and appoint your conveyancing solicitor to manage the legal side of the transaction before the day of the auction. You’ll have to pay a deposit immediately (around the 10% mark) with completion usually set at 28 days from the date of the auction.
What to look out for before auction day
According to Propertymark, the professional body for the property sector, these are the points you should consider if you are interested in buying at an auction:
Find and research suitable properties – look for auction properties through the portals and auction houses in advance of the auction day. You’ll need to get your conveyancing solicitor to look through the legal pack associated with the property to perform the checks on the title and initiate the searches, identifying any covenants or any special conditions that might prevent you from seeing your plans to fruition or that are likely to cost you more money in the long run.
Set a budget and finance – it’s very easy to be swept up by the drama of an auction room, and then find you’ve bid far more than you wanted to (or even that you can feasibly afford). Therefore, it is imperative to set a strict limit above which you won’t bid. You need to factor in the costs of the mortgage, the legal fees, stamp duty, auction costs and renovations. Bear in mind, too, that financing through a mortgage may be more difficult for an auction property than for a standard home, so you’ll also need to think about how to obtain the money to finance the purchase, whether through cash or a bridging loan or through a loan from a friend or family member who is prepared to underwrite the endeavour. Think, too, about whether you want a survey to identify the major structural and condition issues with your target property.
Get the right legal advice – other than your finance, it is essential to get the legal side understood as soon as possible so that you know what you are bidding for and what additional costs the purchase might create for you.
The risks — and the rewards
There are increased risks with buying a property at auction, not the least connected to its condition and how you are going to finance its purchase. But it’s a great experience if you decide to follow this approach and can fund the way of buying your next home.
And you never know: you might just find a little nugget that makes the whole endeavour a major investment for the future.
With Best Value Conveyancing, you get a full legal service at a competitive fixed price — with standard disbursements quoted up front and a no completion, no fee guarantee if your purchase falls through.
Call us on 0800 0387 007 to get started, or get an instant quote.
