Buying at auction is an exciting process - as soon as that hammer falls, the property is yours. However, it is important to make sure you’re prepared in advance and know exactly what you’re buying and how much you are willing to pay for it.
From finding the right property to organising finance, the guide below covers the pros and cons of buying property at auction as well as the process involved.
Use the handy bridging loan calculator this works on mobile too if you need to make quick bridging calculations on the go or at auction.
- You could save thousands of pounds. Auction property is usually cheaper than property on the market for several reasons. The property may require renovation or repair or it may have previously been difficult to sell on the open market. The seller may also be looking for a quick sale.
- There is usually a fast turnaround, so you’ll get the property quickly. It can take up to just four weeks from looking at the brochure to exchanging contracts. Completion will follow soon afterwards.
- There is less chance of a sale falling through. Once you’ve put in a bid and there are no other takers, the property is yours.
- There is less time to get the required finance (however, a bridging loan can help).
- The property could be in poor condition, requiring lots of time, money and effort to renovate or repair it.
- It is easy to get carried away at auctions and you could end up bidding too high a price. You’ll then be committed to paying more than you expected.
Buying property at auction – the process
Below is a brief guide on what to prepare and expect, leading up to auction day.
- Attend a property auction at least once before you plan to join in. You’ll be able to get a feel for the place and see how it’s done. To find a property auction near you, ask your local estate agent or visit www.ukauctionlist.com.
- Research property by looking through auction catalogues. That way you can spend some time checking each one, rather than waiting until auction day and bidding on property you don’t know anything about.
- Contact the auctioneer to arrange viewings for the properties you like. When you look around, make sure you’re aware of everything that requires work or repair, so you can estimate costs on top of the price. Be sure to compare the condition and price with other local properties so you have a good idea of how much it’s worth.
- Let your auctioneer know which properties you’re interested in prior to the auction, to make sure they are not sold without you knowing.
- Read through the legal pack the auctioneer provides on the property to check you are completely aware of any issues involved. It is also a good idea to arrange local searches through a property solicitor as well as a property survey like a homebuyer’s report of building survey.
- Arrange your finances to ensure that you can pay the 10% deposit up front on auction day. You will need to pay the remaining 90% within 28 days which is a very short-time frame. You may be able to get a mortgage offer in time but this can be risky. A bridging loan can provide quick access to funds to cover the property sale until you can get a mortgage. With a fast turnaround, a bridging loan ensures you don’t miss out on the purchase.
- On auction day, you’ll need to bring ID and details of your property solicitor to give at registration. Arrive with plenty of time to spare so you don’t miss any announcements or notices. When you fill in a registration form, you will be issued with a bidding number. The auction will then begin and it will be up to you to bid on the property you want. Be careful not to get carried away and only bid what you can afford.
If you would like more information on bridging loans and how they can help finance your auction property, then get in touch.