Property auctions are a great place to find good deals. There are two significant challenges, however. The first being that you’ll probably have limited knowledge of the property and the second being that you’ll be up against other more experienced investors.
You need a deep understanding of how the process works to get real value if you would be buying at auction. This guide has been compiled to help you get started on the right path.
The 9-Step Framework for Buying at Auction
Property tax default and foreclosures are two of the most common reasons most houses end up at auctions. That said, here are the major steps involved in buying a property at auction.
If you’ve decided on your preferred neighbourhood, you can contact auctioneers catering to this area for a catalogue of available auction homes. UK Auction List, as well as Essential Information Group, are popular websites where you can get info about upcoming auctions.
If you’ve found one or more properties that interest you, you can then arrange a viewing appointment with the auctioneers to see things for yourself. You want to have at least a reasonable amount of knowledge of the property you wish to bid for since you’re obligated to pay after your bid has been accepted.
Checking out the legal documents
The auctioneers will probably give you a legal pack. This will contain the title deeds, local authority, and environmental searches, fixtures-and-fittings list, seller’s information, and other relevant details. You should ensure your solicitor goes through this to uncover any loophole or pressing concerns.
You don’t want to buy a property that will turn out to be a sinkhole or total waste after purchase. Getting a surveyor to conduct a building survey at the very least, a homebuyer report this will help you avoid risky and frustrating purchases.
You also have to arrange the financing in advance, in time for purchase, if your bid is successful. You should arrange for a mortgage in principle before the auction if you plan to finance this with a mortgage.
You can also check with your auctioneer if a particular vendor would consider pre-auction offers. These offers are, however, required to be higher than the guide prices if they will be considered at all.
Preparing your bid
Once you’ve arranged your finances and have concluded essential pre-auction checks, the next thing is to prepare your bid and stick to your budget. I’ve seen many potential investors getting carried away putting in a higher bid for a property that not worth the price and later regretting the decision.
If you’re attending a physical auction, you want to get there early to reserve a comfortable spot. You’ll need two identifications forms such as a passport or your utility bill and another proof that you can afford the 10% deposit. It’s important to know what you can afford so you don’t spend more than you can fund.
Online property auctions have become more prevalent in recent years and won’t require your physical presence. You’ll, however, have to pay a reservation fee to make your bid when the auction starts. It’s important to understand that the guide price is what it is -a guide. It may not determine the final price of the successful bid.
Paying your deposit
If your bid is unsuccessful, it’s not the end of the world. You can still try some other times on some other great properties. However, if your bid gets accepted, you’ll be required to pay 10%, which is subject to a minimum of £5,000.
Insuring the property
Upon signing the contracts, you’ll have to insure the property. This is as simple as speaking with your preferred insurance company to help you make the necessary arrangements.
Completion is typically limited to a maximum of 28 days after the exchange of contracts. It’s however, essential to double-check the contract if there are special conditions attached to the property you’re buying. You have to work with your solicitor to complete the purchase. You risk being sued if you fail to complete the purchase within the allotted time.
Buying at auction can open you up to a lot of great deals.
But you need to be well-educated about the process to help you avoid making uninformed decisions and risky purchases. Staying informed will, however, make a big difference and will help you tick all of the boxes at the right places.