The modern day UK property market has become ever more complicated with many buyers experiencing relatively long chains which can delay and sometimes impact their ability to close a deal. As a consequence, the number of people looking to buy property at auction has increased dramatically of late. This may be due to a number of factors, the simple process of buying for cash when the hammer goes down as well as greater publicity via an array of television programmes.
So what do you need to be aware of when buying a property at auction?
Cost
There are a number of costs to consider when purchasing real estate via the auction route which includes:-
• Administration fee to the auction house (typically anything up to £300)
• Solicitor and conveyancer fees
• Stamp duty on property
• Insurance
• Deposit on a successful bid
• Full cost of the property
While there are some obvious costs in the above list it does make sense to be fully aware of additional fees that you will encounter. If you are stretching your financial capabilities when purchasing a property at auction it may be time to think again.
Research
There are a number of ways in which you can research properties which are available to the public via auction houses. It is in your best interests to do as much research as possible to avoid any unwelcome surprises.
• Check the auction house catalogue for details
• Do not expect to buy the “finished article” at an auction
• Ensure you have a maximum bid in mind based on value for money
• The guide price is literally that, research the local property market prior to auction
• Speak to local estate agents
• Visit an auction as a bystander to see exactly how it works
Do you need a survey?
In theory all of the basic information you require should be noted within the auction house catalogue but there have been instances of significant issues emerging after the auction is finished (the devil is always in the detail!). The only way you can really protect your investment is to have your own survey completed prior to the auction date. This may cost you a few hundred pounds but it could save you an awful lot of money further down the line.
Take advice on the legal pack
The legal pack which is available for potential buyers will have everything you need such as title deeds, environmental searches, list of fixtures and fittings, etc. However, while all of the information is there it may take a legal brain to decipher the small print and any potential issues going forward. If you are uncertain about legal packs then it would make sense to run it by your solicitor at the earliest convenience prior to making an offer.
A guide price is just that
You only need to watch some of the TV programmes highlighting property auction houses to see that very often the guide price is just that, a guide. This is used as a way to attract the attention of would-be buyers with the guide price very often markedly below the “real value”. As a consequence, if you do your research before the auction you should know the “real value” of the property and expect to pay nearer to this as opposed to the guide price.
Prior arrangement of your finances
Once you make a successful bid for a property then you have the obligation to deliver the funds to the auction house in the agreed timescale. Therefore, it is essential that you have your finances in order and a mortgage arranged in principle prior to making an offer. This will ensure that the funds are available as soon as you make a successful bid because if you need to pull out for any reason you will lose your 10% deposit and may incur further costs if the property needs to be relisted.
Once the hammer has fallen on your successful property bid there is literally no going back and you are legally obligated to complete the transaction.