Buying a property at auction can save you time and money, but it can be high risk if you don’t know what you’re doing. Here’s what you need to know.
Buying a property at auction
If you’ve ever been caught up in a lengthy chain when you’ve been buying property and had to wait for months before the others were in position to move you may be attracted by the idea of buying a property in a day. But while the actual process of buying can be over in a matter of minutes, you have to invest some time in preparation before the auction day itself.
SAVVY TIP: When you buy at auction, the fall of the auctioneer’s hammer means you’ve entered into a legal and binding contract.
If you’re interested in buying a property at auction, I’d recommend you do the following:
1. Find an auction and ask for or download the catalogue. This will give you information about the lots that are on sale. Auctioneers normally have an online catalogue, where you just click on the lot you’re interested in and you can download all the information about it.
SAVVY TIP: The catalogue includes information about each property that’s due to be sold including the guide price. However, it is only a guide and the property may go for far more. The catalogue also contains ‘addendum’, which are changes to the details of specific lots. You must read these as they are part of the conditions of sale. You can also download legal information and find out who the seller’s solicitor is.
2. Arrange to view the properties you like. First of all, don’t be alarmed if the internal decor of the property leaves a lot to be desired. Some of these properties are quick sales and the seller is unlikely to have spent time plumping cushions in accent colours. You must be able to see beyond the surface (or get a builder or architect who can do that for you).
SAVVY TIP: I once filmed a TV report about house auctions and was shown a property that a landlord was selling where the tenants’ breakfasts were still on the table and a week’s worth of washing up was in the sink! But the building was structurally sound and in an area that had high demand for student rental property.
3. Register your interest. You should tell the auction company which lots you’re interested in. That way if they’re withdrawn from sale before the auction or information, such as the guide price, changes, you can be told.
4. Get a conveyancing solicitor to look through the legal paperwork. You can download the legal documents from the auction company’s website (or ask for a paper copy, if you prefer). If your bid is successful you’ve entered into a formal contract the moment the hammer comes down so you have to do all the checks in advance.
SAVVY TIP: If you don’t know someone or have a personal recommendation you can look on the Law Society’s website section on finding a solicitor.
5. Do your research and get expert advice. Find out how much properties in the area are selling for (go to property sales websites such as Zoopla and Rightmove) and how much they sold for (use property price websites such as Mouseprice).
SAVVY TIP: Some people buy without having a survey done but it could be an expensive mistake. If you know a friendly builder it may be worth taking them with you before you spend money on a survey done to see if they can spot any obvious problems.
6. Arrange your finances. Unless you’re a cash buyer you’ll need to sort out a mortgage agreement in principle with a bank or building society. This means that they agree to lend you an amount of money subject to final credit checks being done on you. They will want to carry out a valuation before they agree the mortgage so make sure you apply to the lender in good time before the auction.
SAVVY TIP: You’ll also need to have a 10% deposit that you can take with you on auction day. Make sure you find out how the auction house takes deposits.
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