Tips, Tricks, Info and News About the UK Finance Industry.
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Buying at auction is an increasingly popular way to purchase a property. For the potential buyer, auctions can offer property at bargain prices, and the process is also very quick.
Property for sale by auction can usually be found advertised in the local or national newspapers, on the internet, through estate agents and of course, through the auctioneers themselves.
The main attraction of buying at auction is that you can avoid the conventional drawn out process of house buying. At auction, the process can be condensed into a matter of minutes rather than months and when the hammer falls, you own the property.
Property on offer at auctions will vary from repossessed property to redevelopment projects. With an increasing number of house repossessions in the UK, this is becoming the largest reason for properties ending up in the auctions.
Mortgage lenders will often put up their repossessed properties for sale, usually reducing the "reserve" prices to ensure a quick sale. Local authorities and housing associations use them for similar reasons. In this case the lender is looking to get rid of the property as fast as possible in order to recoup some money and in some cases, cut their losses. Other properties put up for auction will be those with development potential or difficult to sell.
Just like any other auction, a guide price will usually be given for each property, although in most cases the final price will far exceed this amount. Most of the properties will have a reserve price – a minimum price at which the seller is prepared to accept. If the reserve price is not met during the bidding then the property will not be sold. In this case it is common for interested parties to approach the vender and attempt to negotiate after the auction.
The main point to remember when buying at auction is that, once a winning bid is accepted, a 10% deposit is paid and contracts are exchanged on the day of the auction. This means that careful financial planning must be made before the day of the auction to ensure that a 10 deposit is available for payment on the day, and the remaining 90% is available within 28 days after.
The buyer will need to complete a survey, arrange the relevant legal searches and have a mortgage offer in place in order to exchange contracts on the day.
Tips for buying property at auction:
- Contact the relevant auction house or estate agents to request a catalogue. Often these will be prepared a few weeks in advance giving the potential buyer time to arrange the finance needed, amongst other things. It is also possible to subscribe to catalogue mailing lists.
- Once you have identified a property either in the newspaper or in the catalogue, arrange a viewing of the lot(s) through the relevant parties.
- Research the property thoroughly including talking to estate agents and local neighbours.
- Carry out all relevant searches, including the land registry and property searches.
- It is always advisable to obtain legal or professional advice. It is necessary to read the conditions of the purchase and question any aspect that you are not sure about.
- As previously mentioned, finance arrangements must be in place before the day of the auction. This will include the 10% deposit available on the day and the remaining 90% usually no later than 28 days after. It is advisable to agree a decision in principle with the lender for the required loan amount. The 10% deposit is usually non refundable if finance cannot be secured thereafter.
- Don't get emotionally involved. Set yourself a budget and stick to it, be prepared to let go.
It must be understood that purchasing a property at auction is a legally binding commitment and carries the same legal implications as a signed contract by private treaty. A proposed bid at auction will require a substantial outlay on the valuation and legal fees without any guarantee of a successful bid. In this way there is a large element of speculation and it can often be easy to become carried away at auction and buy a property that cannot be afforded.
Property for sale by auction can usually be found advertised in the local or national newspapers, on the internet, through estate agents and of course, through the auctioneers themselves.
The main attraction of buying at auction is that you can avoid the conventional drawn out process of house buying. At auction, the process can be condensed into a matter of minutes rather than months and when the hammer falls, you own the property.
Property on offer at auctions will vary from repossessed property to redevelopment projects. With an increasing number of house repossessions in the UK, this is becoming the largest reason for properties ending up in the auctions.
Mortgage lenders will often put up their repossessed properties for sale, usually reducing the "reserve" prices to ensure a quick sale. Local authorities and housing associations use them for similar reasons. In this case the lender is looking to get rid of the property as fast as possible in order to recoup some money and in some cases, cut their losses. Other properties put up for auction will be those with development potential or difficult to sell.
Just like any other auction, a guide price will usually be given for each property, although in most cases the final price will far exceed this amount. Most of the properties will have a reserve price – a minimum price at which the seller is prepared to accept. If the reserve price is not met during the bidding then the property will not be sold. In this case it is common for interested parties to approach the vender and attempt to negotiate after the auction.
The main point to remember when buying at auction is that, once a winning bid is accepted, a 10% deposit is paid and contracts are exchanged on the day of the auction. This means that careful financial planning must be made before the day of the auction to ensure that a 10 deposit is available for payment on the day, and the remaining 90% is available within 28 days after.
The buyer will need to complete a survey, arrange the relevant legal searches and have a mortgage offer in place in order to exchange contracts on the day.
Tips for buying property at auction:
- Contact the relevant auction house or estate agents to request a catalogue. Often these will be prepared a few weeks in advance giving the potential buyer time to arrange the finance needed, amongst other things. It is also possible to subscribe to catalogue mailing lists.
- Once you have identified a property either in the newspaper or in the catalogue, arrange a viewing of the lot(s) through the relevant parties.
- Research the property thoroughly including talking to estate agents and local neighbours.
- Carry out all relevant searches, including the land registry and property searches.
- It is always advisable to obtain legal or professional advice. It is necessary to read the conditions of the purchase and question any aspect that you are not sure about.
- As previously mentioned, finance arrangements must be in place before the day of the auction. This will include the 10% deposit available on the day and the remaining 90% usually no later than 28 days after. It is advisable to agree a decision in principle with the lender for the required loan amount. The 10% deposit is usually non refundable if finance cannot be secured thereafter.
- Don't get emotionally involved. Set yourself a budget and stick to it, be prepared to let go.
It must be understood that purchasing a property at auction is a legally binding commitment and carries the same legal implications as a signed contract by private treaty. A proposed bid at auction will require a substantial outlay on the valuation and legal fees without any guarantee of a successful bid. In this way there is a large element of speculation and it can often be easy to become carried away at auction and buy a property that cannot be afforded.
