Buying a property at auction is becoming increasingly popular in the UK residential property market. Because once the hammer falls, the sale is done, auction sales can create more excitement than buying a home via a listing with an estate agent or private sale. However, caution is required. Without adequate preparation, purchasing your home through an auction can lead to costly repercussions.
Auction houses produce catalogues listing basic property details and a guide price. Properties of poor condition or with problematic legal titles are often sold at auction; so beware of the “bargain properties.” Once you have found a possible property, research the market and area, look at comparable prices and talk to local estate agents. Ensure your property search is extensive enough to know you have found the right property at the right guide price.
Here are our five secrets on making sure your auction purchase is a success.
One – Remember caveat emptor (buyer beware) is especially applicable at auctions.
There is no going back on a house purchase once the hammer falls in an auction. The onus is on the buyer to investigate the property thoroughly. Ideally, you should instruct an conveyancing solicitor who is experienced in buying and selling residential properties at action. They will ensure the proper surveys and title searches are done before auction day arrives.
Two – Make sure you stick to budget
Most properties will sell at auction above the guide price. Don’t get sucked into a bidding war. Know your budget limit and stick to it. Make sure you have financial approval before you go to the auction, as a 10% deposit is usually required to be paid immediately if you win. The balance of the purchase price is typically payable within 14-28 days.
Three - Consider making a pre-auction bid
Consider making a pre-auction bid directly to the auction house. If the seller accepts the price, the property could be withdrawn from auction and be yours.
Four - Understand the process
Make sure you familiarise yourself with the bidding process by watching on-line auctions or visiting auction houses. On the auction day, arrive in plenty of time, as you may need to register first in order to bid and also review any variation or addendum to the property details.
If you win the auction, you will be required to sign the memorandum of sale, pay the deposit and an auction house fee. Remember to take identification to the auction in the form of your passport, driver’s license and/or a utility bill as you will be asked to provide ID. You are responsible for the property from the auction date so arrange insurance promptly.
Five – Beware of the risks of buying at auction
Failure to prepare properly for an auction could lead to you being unable to complete the sale. The consequences of not completing on the property purchase are loss of the property, your deposit and being liable for associated costs. In addition, you could face legal action from the seller if the property is subsequently sold for a lower value.
Getting advice from an experienced conveyancing solicitor early in the auction process is imperative. By doing so, you have the best chance of successfully making a solid property purchase within your fixed budget.
As a long-established South Wales law firm, Devonalds Solicitors have years of experience with property auctions. We are committed to being clear on costs and always have our clients’ best interests at heart. If you wish to instruct us to assist with purchasing property at auction or any other residential property matter, please get in touch with our friendly experts today.