Bidding on properties at auction can be addictive and exhilarating if you can get the property you want without someone else driving the bidding price up and out of your pre determined budget.
TV programmes like “Homes Under The Hammer” have created a real appetite among novice property investors, but can TV shows really give serious investors an insight into what really happens at a property auction, and what are the real processes involved with bagging a property bargain?
There is usually a wide choice of property types available at a property auction, and property purchases can be conducted with speed, price transparency and certainty of sale plus there is always the chance to bag a real property bargain every now and then, which could explain why so many people are looking at property auctions to provide them with suitable investment opportunities.
In order to be successful at auction, investors should have done thorough due diligence on the properties that they are interested including surveys and the interior of properties should be viewed wherever practical.
Serious property investors should be properly prepared prior to entering the auction room and ready to act quickly. It may appear to be a little daunting and overwhelming to begin with, but with practice and conducting the correct due diligence, you will soon be bidding to purchase properties at auction.
Auction catalogues are often sent out to interested parties by auction rooms about 2 -3 weeks before an auction sale date, so property investors are advised to register with multiple auctioneers operating in their chosen area beforehand.
Auction houses usually conduct viewings on offered property lots on a block basis. Usually there will be four viewing dates offered to property investors before the auction date. Professional auction hunters often get in early for viewings, so don’t hesitate!
Do’s & Don’ts
Watch this short clip to see what auctioneers advise about bidding on properties at auction Due Diligence is vital, try to conduct as much research as you possibly can before viewing the properties you are interested in. Visit the areas that the prospective property purchases are located in at different times of the day and night, check the local crime statistics for the area and visit online property portals such as Rightmove and Zoopla to investigate comparable property prices. It may also be worth calling a few local estate agents surrounding the area that the property at auction is located in, as they can be a real goldmine of information.
If property investors like what the auction property has to offer then they need to be ready to act quickly. Finance can be applied for ahead of the auction sale date and where possible surveys should be undertaken. Mortgages can be obtained on most auction properties, even if they require a little TLC, but having a kitchen sink and toilet is crucial to obtaining mortgage finance.
Property Investors are advised to get all legal paperwork checked ahead of the property auction date as this can save investors many serious headaches further down the line.
There may be legal issues which can affect the value of the property offered at auction and this can have a knock on effect for the ability to raise finance. Solicitors can check the legal pack prior to the auction for a nominal fee and if the investor is the successful bidder then this fee is usually deducted from the final bill.
Get accurate costs for any repairs, maintenance or structural works which the auction property requires and, where possible, try and obtain quotes from at least 3 trusted tradesmen in advance so you have a clear idea of the costs required and will allow investors to budget correctly.
On the auction day, it is advisable to arrive early and have photo ID, proof of your current address and at least 10% deposit funds if you are the successful bidder. Ensure there have been no last minute amendments to the property details and position yourself ready to bid.
The due diligence and comparable property research should give investors an idea of the true market value of the property and the cost of any required works, this will determine the maximum value of any bid and will set a ceiling price for purchase. Try to include all costs when doing your calculations, as these can soon add up, things like stamp duty, legal fees, finance costs etc and round the figures up to the nearest whole rather than estimating down.
There is no set procedure for bidding at auction, often described by professional auction hunters as more of an art than a science. The key point is to be seen by the auctioneer. Sit somewhere where you feel comfortable and where can see the whites of the auctioneers eyes, it is only the auctioneer who can accept bids on the auction and their decision is final.
People sometimes get carried away at property auctions and auction fever can strike even the most seasoned property investor, stick to the limit that you set yourself based on your own due diligence calculations and once that price threshold is reached, STOP BIDDING!
Sit on your hands or leave the room so you’re not tempted to bid further, lowering any potential profit and leaving the investor out on a financial limb.
When the hammer falls the property is sold and the winning bidder is committed to buying, paying at least a 10% deposit on the day plus the auctioneer administration fees and contracts will be exchanged.
Auction property sales usually complete in about 28 days. Successful bidders need to ensure that they inform their conveyance solicitors and mortgage or finance lenders immediately and organise immediate buildings insurance cover.
All parties should then endeavour to complete the required paperwork on time as any delays can incur additional financial penalties, so circle the expected completion date on your calendar and stay on top of the process to make sure that everybody is working together towards completion.
Purchasing properties at auction can be a real buzz, if you are still unsure about what happens inside the auction room, check out this short video and see for yourself what happens inside a property auction.
Go along to the next property auction near where you live, there are usually a few in major towns and cities in the UK every month and stand at the back and observe, even if there isn’t a property that you like the look of at that particular auction, it will give you a feel for the whole process and the real beauty of a property auction is that when the gavel falls, the property is sold.
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