Buying a house at auction can seem appealing to both seasoned home buyers and first time buyers alike. The prospect of a potential bargain as well as avoiding a lengthy buying process is a big plus for anybody who has been through the conventional home buying process only to have somebody pull out of the sale in the final hours.
But buying a property at speed is not without its risks, and once the hammer falls, you’re in a legally binding contract.
Buying a house at auction
Aside from the speed of the transaction, the before and after of buying a home at auction is still akin to buying a home the conventional way. You will still need to pay a solicitor to handle the conveyancing and you will still be liable for stamp duty.
You will also need the 10% deposit as well as access to the remaining 90% within 28 days. If you don’t have the money after that time, you will lose your deposit and the property. With this in mind, if you require a mortgage I recommend arranging a mortgage agreement in principle before committing to the sale.
If you have concerns about having the funds ready in time, you can always consider a bridging loan until your mortgage offer is finalised, this typically takes around 10 days to sort out and is quicker than the average residential mortgage although does attract additional fees that must be included in your budget.
Do your research
Request the catalogue from the auctioneers (many auction houses print these weeks in advance and provide them for free), make a list of the properties you like and contact the auctioneer to arrange a viewing.
Auctioneers will provide you with a legal pack for properties you are interested in, be sure to go through these with a fine tooth comb. If you have a conveyancing solicitor lined up, have them take a look as well to make sure there aren’t any title defects or other legal issues that could affect valuation or your ability to mortgage or re-sell in the future.
I highly recommend getting a survey done, depending on the state of the property it may be worth paying extra for a full structural survey to give you a better idea of what you’re getting yourself in for.
Bear in mind that many properties end up at auction because they are either unusual and agents don’t know how to sell them, or they have title or legal defects that prevent them being sold on the open market. We’ve seen people purchase a property at auction only to have it condemned by the local council shortly afterwards. Get a survey done, you can’t put a price on peace of mind.
Stick to your budget
I really can’t stress this enough.
Yes, it is possible to snatch an absolute bargain at auction and it’s easy to get your hopes up when the guide price for the property is much lower than the market average.
But the reality is very few properties go for the guide price, so stick to your guns and don’t get caught in a bidding war.
In the short term, you may resent the fact that you spent time and money researching the property and getting an expensive survey done, but losing out on a few hundred pounds is certainly better than finding yourself tied to a property you can’t afford or more importantly cannot be sold or charged.
If you purchase the property well beyond your budget and you can’t afford the deposit up front, you may even find yourself being sued by the vendor.
Alternatively, if the property goes for well below the guide price and doesn’t meet its reserve, don’t be disheartened as the seller has the option to take the highest bid, so it’s worth hanging around till the end and speaking to the seller.
Auction houses will charge administration fees, so it’s worth researching what fees will be charged and factoring these into your budget.
Go to an auction (or watch one online)
Auctions can be exciting and fast paced or intimidating and bewildering depending on your disposition.
It’s beneficial to attend an auction in person beforehand to get an idea of how they operate, this will allow you to be more comfortable and focused on the task at hand when it comes to your own auction.
If you cannot attend one in person, you can view property auctions online at the Essential Information Group website.
Have a solicitor lined up before the auction
Having an experienced conveyancing solicitor lined before buying your property can help mitigate many of the risks that can come with buying a property at auction. They will be able to identify any red flags in the legal pack as well as any hidden conditions of sale (e.g. if you are required to pay the sellers legal fees, depending on the price of the property this can get pricey!).
A conveyancing solicitor will also be able to assist you if you are selling your property at auction.
They will be able to provide specialist legal advice throughout and produce an auction pack including conveyancing searches, title deeds, leases, office copy entries and any special conditions of sale. This will give any prospective buyers the information they need and ensure your sale goes as smoothly as possible.
At Gorvins, our specialist, full service conveyancing team will be able to assist you whether you are buying or selling a property at auction. To discuss how we can help and to obtain a free quote, give us a call on 0161 930 5151 or email residentialpropertyteam@gorvins.com.