Buying a property at auction can be a straightforward and hassle-free process if you know what to do. In this article, we’ll be looking at the key dos and don’ts of buying a house at auction, so you can avoid any serious and costly mistakes and grab yourself a bargain.
First, why do people sell their homes at auction?
There are three main reasons why someone would sell their property at an auction. The first is the short completion time. If someone successfully bids on the property, then the transaction can happen in 28 days.
You exchange contracts with the seller that very same day and have less than a month to complete, hence why pre-auction conveyancing is so important. If an individual wants to sell their house quickly, an auction can be a great way of achieving that.
The second reason why people sell properties at auctions is because they want to get as many people viewing the house as possible. People are always looking for the best deal, and the more people view the property the more competition there will be in the bidding, driving the price up and getting the seller a high price.
The third reason for selling at an auction is because it is a problem property. Auction houses, in some cases, can have structural damage, something wrong with the tenancies, or anything else, but if it’s a problem house someone wants to get rid of it. This is why you need to be careful when buying a property at an auction and sticking to the dos and don’ts in this guide.
Doing your research and due diligence before purchasing at an auction is extremely important. You always need to read your auction legal pack carefully and make sure your solicitor goes through it too. In particular, you’re looking out for what’s known as special conditions.
In the special conditions, it will state how long you’ve got to complete the purchase. Normally, this is 28 days, but it could be 14. It may also say things like, you have to pay the fees of the seller. Legal packs will be easily available for you to access in advance of the auction.
Another reason to use a solicitor for reviewing the pack is that it is common for the seller to hide thousands of pounds of additional costs payable by the buyer in the special conditions of the contract.
View the property
You should always view a property in person before you buy it, whether it’s at an auction or not, but it is especially important at auctions. Seeing a property, yourself before you buy it will help you see if there are any possible issues that are driving the seller to push through a quick sale. If there is damage that is worse than you anticipated, you’ve dodged a bullet and potentially saved yourself thousands of pounds in repair bills.
Set your budget
It’s crucial to set a budget prior to the auction and stick to it. After viewing a property and deciding you want to bid, you may have calculated the cost of any refurbishment works you intend to do. So, it’s important that you don’t get swept up in the auction emotions and excitement and bid too high for the property. It’s very easily done, especially if you’re new to auctions and have your heart set on the property.
Make sure your finances are in place
Once you’ve planned your budget, the next step is sorting out how you’re going to pay for your new house if you win the auction. As previously mentioned, auction conveyancing and completion times often happen much quicker than with normal house sales, so you must have your finances arranged before you bid. It’s possible to buy a house at auction with a mortgage, as long as a mortgage in principle has been secured, alternatively you could also use short term bridging loans.
Be put off by renovation work
Properties with a lot of problems and damage are red flags, but some houses being sold at auction might only need a bit of modernising and freshening up. You might have had to do this if you bought a house the traditional way anyway and you could probably get one at auction at a much better price.
Forget about the quick timescales
The auction process is significantly quicker than a standard private treaty sale and it’s often more secure. This is in part due to the contracts being exchanged so soon after the end of the auction and completion shortly after that.
It’s important to check the auction pack for completion times on any house you’re interested in buying to ensure your finances are in place and your property lawyer can organise the paperwork in time. If you’re not able to pay for your purchase by the completion date, you may be charged interest or sued by the seller.
Buy at auction without solicitor advice
A big part of doing your research involves having an experienced solicitor reviewing the legal pack and any other documents well in advance of bidding. This is to make sure that anything you aren’t happy with regarding the property is identified and dealt with before you commit to the sale. Going to an auction without any guidance or legal advice from a solicitor could lead you to buy a problem house or overpay, which will cause you further headaches after the auction.
Think auctions are only for investors
Anyone can buy a house at an auction, it’s not only for property professionals or investors. Whether you’re an individual looking for a rental house, a couple looking for a new project, a family looking for a cheap house to move into, or a company owner looking for new premises, if you find a property that’s right for you and you’re equipped with knowledge and advice from your solicitor, make a bid and see what happens.
If you’re attending an auction and are looking for pre-auction conveyancing in Whitley Bay, contact our team at Toomey Legal today. Our expert conveyancing solicitors can help you get all your paperwork ready for you to bid on your chosen property in Whitley Bay and efficiently complete the transaction if you’re successful.