Buying a home at auction can be very exciting. You might pick one up for less than the maximum price you’ve set yourself. But beware of the pitfalls.
Here are the five golden rules to follow before sticking your hand up in the auction room.
Shop around first
There are literally thousands of properties going to auction in the UK every month, from small sales of a handful of lots in regional venues to the big London auctions of up to 300 lots. Most auctioneers will also list their lots on the main property portals.
Check the auctioneers’ guide prices. These will usually be a guide to the likely level of the reserve price and not the ultimate sale figure – which could of course be a lot higher.
Don’t be afraid to ask questions, however silly they may seem, of the auctioneers.
Check out the property itself
You can never prepare enough before bidding at auction. Go and see the lot that you would like to bid for. It may seem crazy, but many professionals buy without viewing first. That’s not a good idea. It’s buyer beware. Instruct a surveyor to take a look at the building and report to you on its condition. A lot of property that goes under the hammer needs work. That could range from redecorating to rebuilding. There’ll be plenty of opportunities out there for adding value. But remember – the more thorough the homework, the less chance of nasty expensive surprises.
Always instruct a solicitor to make legal enquiries
Download the legal documents from the auctioneers’ website. Send these to your solicitor and ask for advice. Your solicitor will raise enquiries with the sellers’ solicitors.
Arrange your finance before bidding
Never bid at auction unless you have the money to pay the deposit (10%) and any buyer’s fee on the day. Remember that completion of your purchase will usually be within one month. By that time, you will need to have the balance of the purchase price available. So, if you need a mortgage, it’s much safer to arrange this in principle before bidding. If you fail to complete your purchase you could lose your deposit.
On the day
Always remember that the fall of the auctioneer’s hammer is the point at which the sale becomes legally binding. After that, there’s no turning back.
Don’t forget your cheque book and two forms of ID (photo and address). Set yourself a price limit and stick to it. This is harder than it sounds. In the heat of the moment – and with a skilled auctioneer working the bidding – you could easily get carried away. Maybe go to a few sales as a spectator first so that you can get the hang of how things work. If you’re concerned about overpaying, you could always ask a friend to bid for you, or perhaps make a written maximum bid for the auctioneer to take by proxy. He’ll bid for you up to your figure – but not beyond it. If you’re bidding yourself, don’t delay. Things happen very quickly so stay alert. Bid clearly so that the auctioneer doesn’t miss you. Don’t worry – he won’t sell you a house if you scratch your nose.
Above all, remember, if you’re not happy and confident by auction day – then don’t bid!
Resouces: WMA PROPERTY