Investment Property Guide Uk-Introduction to Buying At Auction – with the price of houses rising almost daily in the United Kingdom, one of the ways that many people are attempting to acquire their first home (or to obtain cheap property for buy to let Purposes) is to buy at a property at auction. Like EBay, buying at an auction can be fun, but it does require discipline, the stakes are much higher and if you simply think you will turn up and acquire the bargain of a lifetime, then forget it. There are likely to be a number of shrewd buyers in the room with you, so be prepared. We estimate that there are in excess of 25000 property auctions each year in the United Kingdom and yes, property prices are generally lower but you may find that a lot of the property coming through auction houses is “ distressed” in someway. Certainly unusual lots will appear, perhaps former commercial buildings, schools, churches and sometimes parcels of land. You may find that some of the buildings have suffered previous subsidence problems or are situated on a flood plain. You may find that dream renovation property that will require a lot of work (and expense) but may well be worth it in the long run.
What type of Buyer are You? – probably the first thing you should attend to before you even think about going to an auction, is working out what type of buyer you are Are you going to use your own funds or are you hoping to secure a mortgage on the property. The points to remember are the same. What ever the final hammer price of the property is, you must add the buyers premium (about 1.5%) and will need to leave a 10% deposit on the day of the auction. What ever means by which you wish to pay the balance by, it will have to be forthcoming within 28 days of the sale date. If you are going to seek to obtain a mortgage, remember to factor in all of the extras, such as renovation costs etc. When you have done the above, you may like to visit a few auctions just to see how event s proceed before you actually attempt to bid.
*** Important Note- buying at a property auction is a binding commitment and carries the same legal implications as if you were buying the property by conventional means. When the hammer falls, the property is your and you must be prepared to source your own insurance if the auctioneer can not provide you with temporary cover.
Obtaining the Information – Prior to Auction – there are now over 225 auction houses in the United Kingdom that have property auctions, information is usually released by catalogue about 4 weeks before the sale date. You can use this time to view the property, do your research in to the area and location and if you are serious, arrange to have a survey carried out. The survey may cost you around £200.00 but it could save you a lot of problems, particularly if it turns out the property has structural problems. A number of persons have brought property at auctions knowing that it has suffered from subsidence in the past or has been underpinned. Think carefully before you do this, it may not bother you but it may bother a future purchaser, particularly if they have to secure a loan on the property. Remember, lenders will only provide a mortgage if the building can be insured, if you cannot obtain insurance to cover subsidence, they may not want to lend you the money. At this stage it may also be a good idea to obtain an in principle decision from a lender as to how much money you can borrow, if you cannot come up with funding within 28 days, you may lose your 10 % deposit You can find out about Property Auctions from a number of sources, some information is available on the Internet, some by subscription newsletter, local newspapers are also a very good source of auction information. One typical mistake by would be purchasers, is to either not check with local estate agents what similar properties fetch or in the case of buy to let to speak to letting agent to enquire as to the amounts similar properties have been rented at.
The Auction Day? – property auction rooms can be very exciting but remember, you are not going for the excitement, you are attempting to buy a property at a price below the market value and as such you will need to be prepared and alert. Make sure you are well positioned within the auction room so as the auctioneer can see you, if you are unsure as how to bid, ask them about it before hand, they will only be too pleased to explain the process to you. The following information may to of help to you on auction day.
- Take at least two forms of ID with you as well as your bank account details, cheque book, credit card and debit cards. You will have to pay a deposit if you win.
- Many auction houses require you to register your attention to bid, don’t miss out because you have failed to register.
- Sometimes late changes are made to the catalogue, property information can be amended or even withdrawn, always make sure you have the latest information.
- If the property fails to reach it’s reserve price, make inquiries after the sale has finished, you may to able to negotiate with the auctioneer and the owner.