Property auctions used to be rather specialised events, but now they have become quite mainstream in the UK. They seem to feature on TV all the time.
All sorts of different types of properties are sold at auction these days. I've seen everything from the pristine and prestige, through the middle ground of properties ripe for restoration or development, and down to the dregs of the defective and downright ugly.
If you're thinking about investing in property, it will be worthwhile getting hold of auction catalogues for your area, even if you don't intend to actually buy through auction. Study what's available. Even better, view some properties and attend some auctions, as this will help you cross-check the prices being asked by estate agents.
As a buyer, the auction route can offer you the opportunity to get a good deal. There are three main reasons for this:
1. Often the auction hammer price will be cheaper than that for a comparable property sold through the high-street estate agents, particularly if there are few bidders on the day.
2. Properties with improvement or development potential are often sold through auction, so if you're looking for this sort of thing, auctions are an important place to look.
3. The auction process is quick and certain. The marketing period is usually only about three weeks prior to the auction and once the hammer falls on the day, a binding contract is made and the property is yours, if your bid wins.
So you can get a good deal, but you do have to take extreme care when buying at auction. You should ask yourself, “Why did the seller choose to sell this property at auction?"
Realise that sellers will be looking for some benefit, in return for taking the risk of being forced to accept a lower price than they would really like. It may be just the benefit of a quick sale.
However, some sellers may be using auction to dispose of a property that would not be easy to sell, by other means. This is why you need to be wary.
The property may need significant work, although this could be the very reason for your interest, if you are a developer.
However, there may be more serious problems that could be financially ruinous. Examples are defective title, rights of way issues, structural problems and disputes between freeholders and leaseholders.
Many problems are supposed to be disclosed by the seller, but in practice, you will probably have to identify the problems yourself, with assistance from your professional advisers such as surveyors and solicitors. Also, remember that with auctions, there's only limited time to investigate these things, typically just a couple of weeks. It can be even less, particularly if the seller is slow to make information available before the auction. It is not uncommon for important, new information to appear right up to the day of the auction. It is therefore vital to have a good, responsive solicitor who will pull out all the stops if necessary, to help you decide whether to bid or not.
If you are serious about buying at auction and you are on the lookout for a bargain, then remember the following points.
1. Get the catalogue early, so as to maximise the time you have before the auction day. View the properties that interest you at the first available opportunity.
2. Get your finance sorted out upfront. Remember that if you are a successful bidder, you will have to pay 10% immediately by bank draft, followed by the remainder on completion (usually 28 days later). Don’t think you can bid first and then arrange a mortgage later, if you are successful – the penalties for defaulting can be serious.
3. If you decide to bid for a property, ensure your solicitor gets the legal papers straightaway and knows the auction date, so he can carry out enquiries urgently.
4. Find out as much about the property as you can. Talk to the neighbours. Try asking local estate agents what they know.
5. Have a survey – try to get a quick, but thorough survey, perhaps with a verbal report to save time.
6. Decide the maximum price you can afford to pay and stick to it on the day.
7. Be prepared to be disappointed. On the day, there may be several keen bidders for your lot, but only one can be the winner. You may well have to write-off your legal and survey costs, together with a good deal of emotional effort.
Nick Radford is an experienced UK property investor. He has been successful at buying, selling, letting, managing and developing property. He has written about property investment for several years, and has been published in print, as well as on the net. He is now writing for CountryLandOwner.com, http://www.CountryLandOwner.com .