We were taking a look at themain details of the SpringBudget for last week's Finance Fridays. This week we are talkingabout buying property at auction.
If you have ever watchedtelevision on a weekday morning then no doubt you have come acrossHomes Under The Hammer on BBC1. This programme followsproperties being sold at auction and what the new owners then do withthem. Many auction properties are bought cheaply and then done up tosell at a profit or rented out as a long term investment. For otherpeople they find it a more affordable way to get onto the propertyladder or to expand a business. It can also be very quick as once thehammer falls on your winning bid you own the property unlike themonths it can take if buying through an estate agent. Before you takethe plunge make sure you know what the pitfalls are and the processyou need to follow.
Never just turn up at anauction intending to buy – Property auctions involve thousandsof pounds so don't be tempted to buy a property without all theknowledge first. It is a good idea to visit a couple of auctionsbefore you intend to buy so you can get an idea of what happens andthe processes involve. Just make sure you don't register as a bidderfirst!
Visit the propertybeforehand – This will give you a basic idea if the property isright for you. The auction catalogue may make no mention of potentialnearby problems. For example it could be near a polluting factory oron a very busy road. You may also find the neighbouring propertiesare run down which could affect the future resale price. By lookingat the property itself you can get an idea of what structural orcosmetic work that needs to be done on the property.
Read the legal pack –The legal pack should contain any special conditions of sale, titledeeds, leases, office copy entries, search and replies topre-contract enquiries. If parts of it are missing then ask why. Ifthere is a problem with the title deeds it could end up with alengthy and expensive legal dispute.
Do the relevant searches– If they aren't contained in the legal pack just like any propertypurchase make sure you get a copy of the property and land searches.
Get quotes – If youare interested in buying the property get quotes to see how much itwould cost to get any necessary work done. You may find it would workout cheaper to buy another property. Also check out what the marketvalue of the property would be once the work is done. It will giveyou an idea of the maximum price you will need to go to at theauction.
On the auction day –Get there early so you're not too flustered before the auctionstarts. You can also get your pick of the seats. Make sure you bringsuitable identification with you plus your banking details. Check theaddendum sheet to see if there are any changes to the property youare interested in. It could be that it has been withdrawn from salewhich means you can go straight home again! If there are changes tothe property make sure you understand the implications before youdecide to proceed to bid on it. If you are still wanting to bid thenregister with the auction house.
Don't go over your budget– Once you have decided on a property set budget and stick to it.Don't get carried away in the heat of the auction. If someone elsecan afford to pay more for it then let them.
Stick to the property youresearched – If you have missed out on your intended propertydon't be tempted to go for another instead if you don't know all thedetails about it.
Make sure you have thefinances in place – A bid is legally binding and after theauction has finished you will need to pay the 10% deposit straightaway. You will then have 28 days to pay the remaining balance. If yourequire a mortgage you will need a decision in principle beforehandwhich is why it is important you don't buy another property at theauction or overspend. If you are buying with cash you will need toaccess the funds in time. If you don't make the 28 day deadline youcould end up forfeiting your 10% deposit.
Unsold properties –Each property usually has an initial guide price but it may also havea reserve price attached it. This will be the lowest price that theseller wishes it to go for. The final bid on the property may not behigh enough to meet the reserve price. If this happens to theproperty you are interested in then speak to the auctioneer when theauction finishes. They may be able to negotiate with the seller aboutselling the property to you.
Have you ever bought aproperty at auction? Would you consider buying a property this way?
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