Buying property at auction can save you up to a third off the price or more, so it is well worth looking at this form of purchase. Here we address some of the most frequently asked questions regarding property auctions.
Property, whether residential or commercial, is normally sold at auction for various reasons: the property may have been repossessed by the bank and needs to be sold quickly; it could have strong renovation potential but some legal restrictions upon it and is not offered on real estate agents’ listings; or it may have remained on the market for too long and is proving difficult to sell.
The auction will take place either at an auction room or, in some cases, at the property itself. Bidders (prospective buyers) assemble in the same room at the auction, having decided upon a ceiling price (maximum amount they are prepared to offer), dependant upon the finance they can raise.
At the drop of the auctioneer’ hammer, if yours is the highest bid, you are legally committed to the purchase and will be expected to deposit around 10% to the auctioneer. The vendor, in turn, is committed to the sale. Your solicitor will then need to carry out the legal work required.
The purchase procedure will then continue in the same way as any other property purchase, however, the transaction must be completed within 28 days.
Low price: First and foremost, the purchase price is invariably below market value and, provided you chose the right property in a good location and keep to your ceiling price, you will save yourself thousands when buying at auction.
More properties: Many properties in need of renovation are sold through auction, without even making it to an estate agent’s listings, meaning that auctions can often offer a wider selection of properties to choose from.
No delays: Contracts are exchanged as soon as the hammer drops. The vendor and purchaser are then legally obliged to go ahead with the transaction which, in UK law, avoids the disappointment of ‘gazumping’ (the vendor later accepting a higher offer from another buyer).
Valuations will already have been undertaken and a mortgage approved, all translating to speedy completion within a month
There can be no property chain which, in usual transactions, so often causes delay and can even break the deal
Preparation: This needs to be done prior to attending the auction and can be laborious, while not necessarily leading to a successful bid. If you overlook preparation, you could find yourself with a costly mistake.
Money: Unless you are a cash buyer, you will need to apply for a mortgage and get a bank valuation, meaning a financial outlay for a property you may not be successful in purchasing. Expenditure will also include the cost of a full structural survey and having a legal representative carry out the usual searches to ensure that if you bid successfully, the property will be free of debts and you will gain clear title.
Property auctions are advertised in local press, the internet and via estate agents. You may also see “For Sale at Auction” signs outside the properties themselves. Alternatively, you could phone auction houses and ask them when the next auction will take place. Find out what type of properties they normally sell and ask to be put on the mailing list. Auctioneers will usually publish a catalogue of properties available to prospective buyers about one month prior to the auction date.
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