Buying a property is a massive step which many people find difficult to accomplish by going to market. An alternative is to make a property purchase at auction. Having access to a range of properties at discounted prices might appear as an obvious choice for those looking to buy a property. However, there are certain risks with making a property purchase at auction that you need to be aware of before you go in.
This blog aims to provide information for buyers on property auctions, to allow them to make an informed decision as to whether it’s their best of option.
What happens at a property auction?
A property auction operates similarly to any other. Goods are bought and sold through a bidding process, where bids are taken, and each property is sold to the person who bids the highest amount. Auctions are popular events for those who are looking to complete sales and purchases quickly.
When a property is confirmed for a particular buyer, they must pay a deposit to secure the purchase. This is typically 10% of the agreed price. The buyer and seller are then given a month to complete the sale, at which point the other 90% of the funds must be transferred.
What to be aware of when buying a house at auction
Although buying at auction might seem easy, it requires that buyers make preparations to ensure they can secure the best outcome. This involves taking steps to ensure you informed of all the relevant aspects of the properties to be auctioned. We recommend to:
- Examine the viewing catalogue: this contains a list of each property along with their features and guide price (an estimated value of the property). Buyers should bear in mind that the guide price and reserve price can change up to the day of the auction.
- Check the legal pack: the legal pack contains a variety of documentation that relates to different parts of the purchase, such as conditions of sale. Going over this pack with your solicitor as part of pre-auction conveyancing will guarantee you don’t miss anything.
- Decide on your price limit: keep your budget in mind when going into the auction. You can do research to see what properties in the local area have sold for recently and provide context.
- Register with the auction house: registration is necessary to take part in the auction.
Buying a property at auction comes with a variety of pros and cons, which can influence buyers’ decisions. Certain aspects might impact you more than others depending on your situation, so each is important to be aware of.
Range of property buyers
Property auctions typically attract landlords, builders, developers, investors, families and more. This means you might only be competing with a few other buyers for the type of property you are interested in. As a result, it’s more likely to secure the property you want at below market price.
Many auction properties are advertised on social media sites such as LinkedIn and Facebook. If you know where to look, you’ll be able to find a property that’s perfect for your needs and that can be bought quickly.
Houses sold at auction are typically free from the influence of outside parties. Instead, it’s just the buyer and seller who are involved in the transaction. This allows the conveyancing process to go ahead unimpeded, leading to the purchase reaching the completion stage far more quickly than normal.
Professional support is available
You don’t have to go it alone when buying a house at an auction. At Toomey Legal, we offer services to help with a range of property purchases. This legal support can make sure you don’t miss out on significant savings on the house of your dreams, along with benefits such as a lack of onward chain.
Risk of going over budget
While a competitive auction environment can be beneficial to buyers by driving prices down, it can also lead to bidding wars that escalate prices. This can lead buyers to overpay on properties that are sold at auction.
Buyers at property auctions are required to pay a fee that commits them to the purchase. This deposit is non-refundable.
Limited time for due diligence
Auction property sales often progress rapidly as they have fixed timelines that must be adhered to. The result is that there isn’t always adequate time for inspections, property surveys, and area checks.
Experts in residential and commercial property
Toomey Legal provides services as both residential and commercial conveyancing solicitors. Buying a property at auction can be an intimidating prospect. Our friendly and professional team will help get you prepared. Whatever your goals for property in the north east, we are in your corner to help you get the outcome you want. Contact us today to get started.