Buying property at auction could snag you a bargain, but it can also be a risky business. Here's how to negotiate the potential pitfalls.
Buying a property at auction is both exciting and potentially profitable. It avoids the lengthy purchasing procedures that you usually have to endure and mitigates the risk of a deal falling through at the last-minute.
At an auction, as soon as that hammer falls, that's it - the property is yours. But buying at auction isn't to be undertaken lightly and it pays to do some research.
1. Finding a property auction
First you need to find out when and where there is an auction and what properties are available for purchase. An easy way to do this is by using our Advanced Search and typing 'auction' into the keyword box. Another option is to contact local estate agents who run auctions. You can find local agents with our Find Agents search.
2. Pinpointing the right property
Once you've found an auction or specific auction property, it's time to do your research. You will have individuals who turn up at auctions and bid on properties on the spur of the moment, but while they might occasionally strike it lucky, it's far better to be prepared with an idea of how much the auction property is worth and how much it will cost to do up.
3. Viewing properties
Once you've identified properties you're interested in, contact the auctioneers and arrange a viewing. As when buying any property, more than one viewing is recommended, ideally at different times of the day and week.
Auction properties are often in a poor state, so it is advisable to take a trusted builder or an architect along to find out how the property could be improved and how much it is likely to cost. Read our Helpful hints on viewing property.
Remember that time really is of the essence, though. There is usually four weeks between the publication of the auction catalogue and the auction, so you have to act fast.
4. Research the property and area
While time might be short, you can never do enough research. Compare the price and condition of the property to similar properties that are for sale with local estate agents.
Each Prime Location listing provides information of recent sales of nearby properties and other homes currently for sale in the area. The old mantra of buying the worst looking property on the best street is one to bear in mind here.
The guide price of auction properties is usually set relatively low in order to entice bidders, so work out what you think the true market value of the property is, bid accordingly - and with your head, not your heart!
5. Legal matters
When you express an interest in a property to the auctioneers, there is usually a legal pack available for you to read. Digest this thoroughly and if you're not sure about anything, have your solicitor check it out.
It could contain covenants or certain legalities which could have implications on the value of the property. It might even pay to carry out property and land searches of your own if you have any concerns.
6. Arranging your finances
You will need to make your financial arrangements prior to auction. You must have a 10% deposit with you on auction day, and you must come up with the remaining 90 per cent within 28 days.
If you need a mortgage, it is prudent to have discussed all of financial implications with a bank or building society, and have arranged a mortgage in principle.
If you cannot come up with the rest of the balance, you risk losing the 10% deposit, which will run into thousands or pounds.
7. Preparing for the property auction
When auction day arrives, be prepared. The process can be daunting, so it's not a bad tactic to experience an auction as a spectator before going to one to actually bid.
You don't have to be there in person, as you can bid by telephone, but you will miss out on the buzz of the auction room and being able to look around and assess the competition.
8. The property auction
You'll need to register on arrival. Make sure that you bring identification and enough funds for your 10 per cent. Auction houses can be crowded, so get there early if you want a seat and when the time comes to bid, make sure that you can be seen by the auctioneer and that he is aware of when you're bidding. Don't risk any of the casual scratching of the nose type bidding that you see in the movies.
As the bidding increases, so will your heart rate. Have a figure in your head that you don't want to go over and don't get carried away.
It can be tempting to go over budget, particularly if you've invested a lot of time and effort prior to auction, so if you don't trust yourself, get someone else to go and do the bidding for you.
If the property you're bidding on fails to meet its reserve price, it doesn't necessarily end there. The auctioneers can still act as agents and are able to do a deal between yourselves and the vendors, if a price can be agreed at the end of the lot.
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.
It also isn't unheard of for a deal to be tied up prior to auction, so it's worthwhile checking this possibility out with the auctioneers.
10. Get yourself a bargain
While it can take time to do your homework and be nerve-racking taking part, nothing beats buying a property at auction.
The thrill and euphoria at having a bid accepted and knowing that it is legally binding, is just fantastic, and if you've done your research correctly, then you might just end up with a bargain.
You might also be interested in...
- How to sell a property at auction
- How to be smarter with your property search
- Top 10 most affordable places to buy in London