Why purchase property at auction?
Auctions are a terrific way to prevent lengthy and unsure buying processes but be warned. When the hammer drops you are locked to paying, so be ready.
Auctions are good for finding for odd properties which estate agents would find difficult to market. And, if nobody else has noticed its potential, you could get a bargain.
But auctions are not only for the specialists with insider understanding. They have become increasingly popular with buyers who want to avoid the home buying chain. In an auction, the purchase is agreed once the hammer drops. There is no possibility of falling through in the eleventh hour. And you also see the rest of the bids as they are made. So there is no possibility of being gazumped.
What are the drawbacks to purchasing at auction?
Buyers can be drawn into a bidding contest. Set a limit for the property and stick to it. If you lose you out, you will lose any money spent on checking legal packs and carrying out surveys to the house. It could be very costly if you don’t check legal packs or carry out a survey. Some legal issues will warrant a property solicitor to give you advice. Some building issues may mean that the property is not mortgageable.
You may have to pay a buyers premium to the auction house – check beforehand. You’ll also have to pay stamp duty. this will be at a higher rate if its a second home. Check our guide to stamp duty here.
How can I locate an auction?
Decide on the region you’re interested in and get hold of the auction houses that appeal to this area. Request a catalog and register on their mailing list. To get a list of forthcoming property auctions, see the sites of UK Auctions or the Essential Information Group.
And remember: there’s usually four weeks between the catalog being produced and the auction. You may have to carry out your research quickly.
Examine the catalog and produce a listing of properties you are considering.
Maintain an open mind. Auction properties are usually in a bad condition. This is the reason you are able to find bargains.
You want to be certain you do not pay over the odds. Consider having a builder with you an a viewing so you’ve got a clearer idea about what you are letting yourself in for and how much it’ll cost. If you have a survey, recommended for older properties use our comparison engine to get a price.
Check the guide price with other properties available locally so you can set your maximum bid.
Go and observe a few auctions and also get to learn how they work.
Auctioneers should provide you a legal package for properties you are considering. This includes the title deeds, local authority searches, fixtures-and-fittings lists and any appropriate leasehold info. Consider requesting a lawyer to check over this for almost any concealed covenants or loopholes which might wind up costing you more than you bargained for.
To lure buyers the bid price is generally set a lot lower than the eventual sales price. It is well worth tracking the guide price since if it moves up prior to the auction that this may mean there’s a great deal of interest from the house.
Get your financing in order. Should you require a mortgage, then get a’mortgage principle’ sorted prior to the auction so that it’s ready after you have the property. Check out our mortgage guide.
When the hammer falls you will have to cover 10% of the price on the day. You will then have a month to cover the remaining 90 percent — if you can not you will lose your deposit.
But that is not all you will lose — you might need to pay the expenses of re-selling the property, in addition to any shortfall between the cost you agreed and the final selling cost. You might even be charged interest for every single day before the land is sold.
On the day of the auction – Keep calm
Many people today find auctions fascinating. Others find them frightening.
Be certain that you understand what you are able to afford and do not get trapped in the bidding process. Remember, if you do not get this one there will be another. Get there early and prepare.
Be sure to receive a place where you are comfy where the auctioneer will have the ability to view you.
You will generally need two forms of identification, such as a passport or utility bill, and evidence which you are able to afford the 10% deposit.
If the reserve price is not reached, do not despair. When the property does not go for the reserve price the vendor might opt to pick the maximum bid when the auction is finished — so stick around and approach the auctioneer.
Purchasing via the contemporary method of auction
In the past few years a new kind of auction is now popular called the contemporary procedure of auction. Employed by some estate brokers the contemporary procedure of auction enables buyers to bid on a house on the internet. The Purchaser will pay a non refundable booking fee and also will have more conclusion timescale, providing the purchaser time to form mortgage fund