Guide to buying a house at auction
In the current housing market many people are looking for a property bargain and some may be tempted by bagging a top bargain at an auction. This may well be the route to your dream home on the cheap, but there are potential pitfalls on the way. To make sure your auction experience doesn't become a nightmare, here are my top tips for buying a property at an auction.
1. Do your homework
- If you have never attended an auction before make sure you do so prior to any attempt to buy a property. Auctions can be very exciting, if a little bit manic at times, so you need to get a feel for the atmosphere and understand the process before you attempt to spend your own money.
- Get a feel for property prices of the type and in the area in which you are interested. Just because you are buying at an auction it doesn't mean you will always get a bargain.
- If you require a mortgage to purchase the property then check out the feasibility of getting a loan for the type of property in which you are interested. You need to be aware that if the property needs extensive improvements then a lender may well require a much larger deposit than you had planned. Also make sure you understand the lead-in time to get the mortgage arranged as this must be in place prior to the auction date.
2. Auction catalogue
- Get a copy of the auction catalogue from the auction house as soon as it is published and highlight any properties which you may be interested in.
- Don't take too much notice of the the guide price as this will be set at a level to attract interest. Be prepared for this price to be exceeded at the auction.
- Make sure you view all the properties you find interesting as well as looking round the locality. This will give you a good feel for the area and the condition of neighbouring properties.
Once you have narrowed down your search to the property you want to bid for at the auction, then you will need to get a few things in place before the big day.
- All sellers have to prepare a legal pack at least 7 days prior to the auction. This pack will contain title deeds, searches and any other relevant documents. It is vitally important to have these documents checked out and most solicitors will do this for a fixed price.
- Try and find out why the property is in the auction. There may well be a legitimate reason such as probate, but there may be a more sinister reason, such as a boundary dispute or access issues, which prevent the property being sold on the open market.
- You will need to have a deposit amount, equal to 10% of the purchase price, available on the day of the auction. You will also need to ascertain whether a cheque is acceptable or a bankers draft is required.
- If you are requiring a mortgage to purchase the property then this needs to be in place prior to the auction, as completion must be made within 28 days. Arranging the mortgage will involve paying fees to the lender which may be lost if you don't end up purchasing the property.
- If there is work needed to bring the auction property up to a liveable standard make sure you have an accurate idea of these costs as this will help in deciding the amount you are prepared to pay at the auction.
4. At the auction
- Make sure you set a limit on how much you are prepared to pay for any property, the atmosphere can be very hectic so you don't want to get carried away and spend more than you can afford.
- Make sure you sit where you can be seen and be clear with any bids you make.
- There will be solicitors representing people who are selling, they will have all the deeds and documents with them so you can ask them any last minute questions.
- If you are successful in bidding for a property then, at the end of the auction, you will sign one copy of the contract and the seller, or their solicitor, will sign a second copy. You will also receive documents relating to searches, guarantees etc. and pay your deposit.
- Your solicitor will then move the rest of the transaction forward to completion. Completion must be within 28 days after which you can arrange to move in or start decorating.
To sum up
Buying at auction can save you money especially if you are prepared to do some work on the property yourself. However, there is a reason why the property is in an auction in the first place and you need to satisfy yourself that there are no problems lurking behind the door. As always seek legal advice well in advance of the auction so there are no surprises waiting when the hammer falls.