There has been an increase in the number of repossessed homes becoming available at auction houses, according to the Council of Mortgage Lenders. However, property being sold at auction is not always from repossession. Sometimes vendors decide, for one reason or another, to auction their property because they want a quick sale. So, it is important to remember, although it is possible to save money this way, not every auctioned property is going to be a bargain. If you are planning to venture into the world of property auctions, here are some sensible steps to take to ensure that you are prepared for each part of the journey.
Even before you start to look at property, it is a good idea to have your mortgage agreed “in principle”, which means that a mortgage provider has confirmed how much money they agree to lend you on the basis that the property you intend to buy meets their criteria. That way, you know your mortgage will be ready to go when you start bidding. You should note that some lenders may take 6 – 8 weeks to provide loan papers and, at auctions, you are normally required to pay the price within 28 days.
Visit the auction house a few times to get a feel for the process and to find out how it all works. Study the reserve prices in the catalogues to see how they compare with the eventual selling price at auction.
There are many property auctioneers operating in the UK. It is worth registering with a few local auction houses who will keep you up to date with their listings. The Essential Information Group website provides details of property auctions nationwide and UK Auction List is also worth a visit.
Once you have found a property that sparks your interest, research the neighbourhood and make sure you know the area you are buying in by reading the local papers and checking online for school, planning, and crime reports. There are several differing factors it is wise to consider depending on how you plan to use the property:
Make sure you visit the property before you bid. It might seem obvious, but some people do actually neglect to do this. This is a huge thing to take a risk on, so be safe and get a Chartered Surveyor to look at the property with you.
A good surveyor can:
Do not be tempted to rely on the mortgage lenders survey, as they only carry out a valuation to ensure they can recoup their losses, at auction, if you were to default on your repayments.
The buying process moves very quickly for properties purchased at auction, so ensure you have contacted us to oversee all the legal requirements of your purchase. Any property you intend to purchase should have a corresponding legal pack, so make sure you obtain a copy and pass it to us to assess before you bid, as it may contain clauses that could change your mind about buying. Many auction properties have title problems or structural problems. If you know about these before you commit to buy, you may decide not to proceed. We strongly recommend that you ask us to investigate the title and that you survey the property before you bid at auction.
Before you walk into the auction house, set yourself an upper limit that you are prepared to pay. DO NOT get carried away and over-bid! Auctions can get competitive but do not overstretch your budget for the sake of winning. Two important things to account for in your target price are the cost of any renovations, loan interest charges and any Stamp Duty charges.
Sometimes vendors are willing to consider offers for the property before the auction goes ahead. If you are planning to bid at the auction, you have little to lose by making an offer a little early. If the listing information says “unless previously sold”, you may be onto a winner. If the property did not sell at auction, in many cases the vendor will allow the auctioneer to trade at the reserve price on their behalf up to 24 hours later.
You've won! Congratulations! You are now legally bound to purchase the property and, in Scotland, you normally have to settle the transaction within 4 weeks. When the hammer falls, you have concluded missives and you cannot change your mind. This is why you need to investigate the title and the condition of the property in advance. The mortgage in principle that we spoke about earlier now needs to be secured and ready to complete in time for settlement, so you will need to call both us and your mortgage lender straight away.
If you do not have the funds for the property, you will forfeit your deposit, which at most auction houses is 10% of the property`s sale price. It is likely you will be expected to put down the deposit there and then, so remember to bring your cheque book and two valid forms of identification. Some Auction Houses do not accept personal cheques so you must check their requirements before you attend the auction.