The Dos and Don’ts of Purchasing a Property at Auction
Months of back and forth between vendors, the bank and solicitors are eliminated, as the home-buying process can instead take a matter of minutes. There are a number of bargains to be found at property auctions, but similarly, there’s the propensity for disastrous deals to be made if the right research and preparations aren’t carried out.
If you’re heading to an auction, keep in mind the following tips to have the best possible experience:
Do carry out the standard research prior to going to auction. Just because the method of sale isn’t conventional doesn’t mean to say that the due diligence should be any different when buying a house through auction.
Do familiarize yourself with the process before embarking on it yourself. You could accompany a friend, or simply sit in an auction to get a feel for the process, which can make you feel more comfortable when it comes time to bid.
Do have surveyors look at the property beforehand. A property with a low price tag in a great up-and-coming locale may seem like a good deal, but if it is riddled with severe structural deficiencies or issues that are going to require substantial time and capital to put right, the costs of renovations can quickly leave you out of pocket.
Do sort out your finances prior to attending the auction. When the hammer falls, the winning bidder is expected to sign the papers and part with the deposit on the spot. Unless you are entering into a cash deal, you will need to have your mortgage in place, and any funds required for completion available. Failure to do this can give the seller grounds to sue for the full purchase price!
Do take someone with you, and if they have experience in buying at auction, even better. A bidding war on a property can be exciting, and there’s the potential to become carried away and more engaged in the competition than the property itself. If you have a propensity to run away with the exhilaration, have a friend, family member or partner with you to act as the voice of reason if necessary.
Don’t buy a property on a whim. Repossessed homes in particular can seem like great deals, but they can house a number of problems that the current owners do not have the money to put right. If you buy without visiting the property with a solicitor or surveyor (ideally both) first, you could inherit those problems along with the property.
Don’t enter into an auction without having notified your solicitor, and discussed the property in question with them first. They will be able to inspect the property’s title and alert you to any “buyer beware” scenarios. There can be restrictions in place when purchasing a leasehold property (such as the prohibition of pets), so having the legalities carefully assessed before going to bid is wise.
Don’t put in a bid before asking all relevant queries (Why is the property being sold at auction instead of through the local market? Was the property used as a rental?) Certainty is key in an auction, and if you have reservations or questions, you don’t want to end up in a position where you’ve been awarded the property without having those answered.
Remember, the winning bid is contractually obligated to follow through with the purchase, which means the stakes are high. For confident bidders, it can also mean that there are great deals to be had, and bearing in mind the above points will place you in good standing to win them.
Have more questions about buying property at auction? Contact the experts at Eddisons to have your questions answered, and receive expert advice.
Written by: Rob Limbert on Monday 27/07/2015