Buying a home at an auction
There’s no better feeling than finally securing the home of your dreams! But while buying a new house can be an exciting, emotional rollercoaster, the process itself can also seem quite lengthy, often drawn out over months.
One way of avoiding a lengthy purchasing procedure is to buy your new property at an auction.
For most of us, it’s an unfamiliar method of buying a house. Which is why we’ve put together an introduction to auctions – how they work and what it means for you – to help you decide if this is something to consider for your next property purchase.
Auctions can be a great way of buying a house quickly, cutting out the middle man and, in the process, hopefully getting your house for a very competitive price. Plus it’s a level playing field. No one can get in before you or after you with a more lucrative offer – it all comes down to the day itself. And of course it’s an exciting and dramatic way of buying! When that hammer finally falls after a nail-biting wait, that property is legally yours. And in just a matter of minutes.
And a few cons…
It’s fair to say, auctions are not for everyone. Like all ways of buying property, there are some pitfalls to look out for. The speed can be a little daunting for some people, who worry they could end up with an impulse buy on the day that they then don’t want. The unfamiliarity about the whole process is another factor that people don’t like. And if you don’t thoroughly research the property you intend to buy then if there is anything wrong with it, it’s unfortunately your problem to deal with!
But ultimately if you are fully prepared and organised (and stay calm!) you could walk away with the perfect home for you.
With that in mind, here are some important DOs and DON’Ts to consider.
DON’T believe the myths! Gone are the days when properties sold at auctions were all either repossessed or ‘problem properties’. In fact, there is usually a wide range of different properties on offer, with many sellers now choosing to bypass traditional methods of sale altogether.
DO make sure you do your homework first on the property you are interested in. If it seems to be a barely believable bargain, then there's probably a good reason! So it’s definitely worth visiting a property (more than once) to make sure it’s really for you. If it is, you might want to think about having it thoroughly inspected by a surveyor or an architect before the auction. You only have a short period (usually 3 weeks) between the auction house catalogue being published and the auction taking place, so the more prepared you are the better. And buying at auction is a binding legal commitment, so you want to be sure your new house isn’t hiding any major repairs or problems.
DON’T leave it until the big day to see what an auction is like. You’ll find the whole process much less daunting if you have already seen an auction in action. As you’ll quickly find out, they’re not just for cash buyers who are there every week.
DO get along to as many auctions as possible. It’s the best way to get a feel for the jargon and the procedures. And of course very useful for watching just how the winning bidders win! You’ll see that bidding is actually very simple and you’ll also get an idea of what prices properties are advertised for, and what prices they actually sell for.
DON’T get carried away! People can sometimes pay more than they intended to due to all the excitement in the room. Remember – it's not a race.
DO stick to a strict budget. Work out the maximum you're prepared to pay and stick to it, however exciting the auction room becomes! All the experts will tell you to start low and go slow. If you bid early and low, you're more in control of the situation than if you jump in late.
DON’T leave arranging your mortgage until it’s too late. It is a good idea to check how much you can borrow and how much the repayments will be, and get your mortgage application sorted out well in advance of the day of the auction.
DO have your finance in place. Remember, you only have 28 days after your winning bid to have the conveyancing completed and pay the balance on the property. Plus you'll also need insurance lined up since you become liable for any damage to the property as soon as your bid is accepted.
There are 4 ways you can bid at a property auction:
- In person, by attending the auction room on the day.
- If you can’t make it along, you can choose to bid by proxy and authorise the auction house to act for you and bid on your behalf.
- If you are unable to attend in person, but are available during the time of the auction, you can choose to bid by telephone.
- At some auctions, you can now make bids online.
What you’ll need on the day of the auction
- If your bid is successful, you will need to pay a 10% deposit on the auction day. So you’ll need an acceptable means of paying the deposit with you, such as cheque, debit card, or banker’s draft.
- You’ll also need to take two forms of ID, such as your driving licence or passport, and also proof of your address. And you should bring your solicitor/licensed conveyancer's details and also your banking details.
- Get a copy of the addendum sheet when you arrive, and check for any last minute changes to the property you have your eye on.
- Remember to check with the auction house for any additional specific requirements.
If you are willing to put the time in to learn the ropes, stick to your budget and keep your nerve, then buying a house at auction could mean a much faster, more cost effective purchasing process.
And finally, if you decide this is the route for you, good luck and happy bidding!
The material contained in this article is intended for information purposes only and not as advice.
You should obtain professional legal or other advice if you are unsure about the effect on you of any matter in this article
Published: 26 January 2018