Property auctions are not for the faint-hearted and can be a risky business, as you’ve probably seen on the popular BBC show Homes Under the Hammer; but for the savvy buyer, they can be the answer to their prayers.
How many buyers have endured weeks of waiting, only to find their dream home has fallen through at the eleventh hour? Potential buyers keen to save time – and save money – may find a property auction to their taste. As soon as the hammer falls, the property is yours and you’ve entered into a legally binding contract.
Although turning up on the day and being the highest bidder sounds thrilling – and the fastest way to invest in a new home – advance preparation is needed, as in reality, an impulse buy of this magnitude can be fraught with pitfalls. The best way to begin is to locate an auction by looking through property publications, checking online, registering to receive auction house catalogues, or contacting local estate agents. Spend time reading the auction catalogue and contact the auctioneer to arrange to view any potential property.
Seek expert advice by taking an architect or builder to the viewing and find out how much any renovations would cost. If possible, have a basic survey done. This will cost around £300–£500, but is the cheapest way of avoiding a potential financial loss – you don’t want to spend thousands, only to later discover structural problems.
Obtain a legal pack from the auctioneer and read it thoroughly. Preferably, ask a solicitor to make sure there are no legal or other issues which may devalue the property. There are only four weeks between the catalogue’s publication and the auction, so act fast!
Learn how auctions work by attending one as a spectator first, rather than jumping in at the deep end with no prior experience. Research the prices of similar properties in the same area, as the list price may be deliberately low to encourage more bidders and you will need a more realistic idea of how much you will have to pay. Most importantly, unless you’re a cash buyer, have a mortgage arranged. Have the lender carry out a valuation beforehand, as an agreement in principle may be insufficient.
Once you win the auction, a non-refundable 10% deposit is required, with the remaining 90% payable within 28 days. If you cannot find the remainder of the balance within the timescale, you will lose your deposit and end up with nothing.
Take identification with you to the auction and register on arrival. As the auction begins, make sure you stick to your budget – don’t get carried away as the bidding increases and put in an offer which is beyond your means!
Finally, arrange insurance right away should you win, as the property becomes your responsibility immediately.
If you’ve done your research properly, as a savvy buyer, you may end up grabbing yourself a bargain. Become the best simply by discovering in advance how it works and you may find this is the cheapest way to buy your dream home.