Our Top Ten Tips to buying a home at Auction
Buying your home at Auction has become more popular and is no longer just for investors and developers.
There could several reasons for the increase in popularity. Higher house prices mean that more buyers are looking for a bargain and are willing to do the improvement works themselves to gain greater profits. Changes in government legislation over recent years, has seen some landlords consider a small buy to let portfolio is no longer as lucrative as it once was and cannot be bothered with the hassle and cost of selling.
There is also the possibility with a change in the economic climate, we may also see an influx of distressed sales and repossessed properties being sold at Auction.
We believe that over the next 12 months there will be an increased number of properties being sold via Auction.
If you are considering buying a property at Auction then here are our top ten tips to buying at Auction:
- Plan ahead: research the area, get in touch with local Auction Houses close to your chosen location. Add yourself to their mailing list and catalogues. You need to be in the know as soon as properties are available, usually there is only 4 weeks between advertisement and the Auctions date. You will need this time to research the property and put steps in place.
- Arrange a viewing: We would never advise any client thinking of buying at Auction to buy without seeing the property. Contact the Auction house and arrange a viewing. Ideally you should take a builder or handyman with you, to offer advice about the potential costs or any improvement works of bring the property back up to standard.
- Have a Survey: We recommend all clients commission a survey of any property before bidding at Auction. This might seem like a large expense (approximately £600) however, depending on the property, it could be essential and might save you a fortune if you later discover costly defects which could mean you have paid over the odds for the property.
- Keep up to date: Auction houses often change particulars of properties known as Addendums. Ask the auction house to email you with updates. You will be given any Addendums on the day of the Auction, but it is always better to be prepared, as any changes could alter what you are willing to pay for the property.
- Check the small print: It is important before attending the Auction that you review the Auction Particulars relating to the property. The pack will usually include important legal information about the property, including the Title Deeds, Local Authority Searches, Environmental Search’s, Leasehold information, Fixtures and Fittings and Sellers information. It is important that you get advice before the Auction about the legal title, in case there is are any covenants or loop holes you need to know about, which might be crucial. Most legal advisors change around £250 for this service, however at Gaddes Noble, we offer a free appraisal service. This is so you can be sure there are no hidden legal issues before you buy.
- Get your finance in place: Once your bid had been successful you will usually need to complete the purchase between 14 – 42 days. Unless you are a cash buyer, you need to ensure you have your mortgage in place and your conveyancer has everything ready to comply with the timescales. It is important that you obtain specialist financial advice before you go to Auction. The process of obtaining a mortgage can be a lengthy process, so make sure getting mortgage advice is one of the first things you do. If your bid is accepted and you cannot complete the purchase in time, you may have to pay interest on the sum until completion. If the sale falls through, you may not only have to continue to pay interest until a further sale, but also pay the cost a re-auction and any shortfall in the purchase price if the subsequent buyers bid is less than your original bid. You may also lose your 10% deposit if you do not complete in the timescale set out in the contract.
- You need insurance in place: As soon as your bid has been accepted at Auction, it is your responsibility to insure the property. Make sure you have been in contact with your insurer in advance of the Auction to set up the policy so if you are successful, you will simply need to contact them and get the policy put in place.
- Make sure you have everything you need on the day: As well as all the preliminary steps before the Auction date. Make sure on the day of the Auction you have everything you need. If your bid is successful, the Auction house will expect you to pay your deposit there and then. The deposit is usually 10% of the purchase price but could be more. Make sure you have the funds available. You will also need to pay the administration fee to the Auction house which is usually between £200 – £300. You will also need to bring two forms of ID, usually Passport/Driving Licence and a utility bill.
- Instruct your conveyancer before the Auction: At Gaddes Noble, we understand the time constraints put on buyers at Auction. There are many preliminary steps which a conveyancer needs to get in place before setting up the conveyancing process. We can open a file, obtain all your personal information and mortgage details before the Auction takes place. We can also advise you in advance of the Auction about your chosen properties so that when you are successful, you know the legal issues and we have all the preliminary information on file and ready to go as soon as the hammer falls.
- Relax: Auctions can be exciting and scary all at the same time. Making sure you are prepared before the Auction, means that you can do your best to be as focused as possible on the day, so when the hammer falls and you are the successful bidder, you can be confident you have everything in place for the purchase to go as smoothly as possible.
At Gaddes Noble Property Lawyers, our expert team understand the complexities of buying at Auction. We can explain to you the legal jargon and guide you through what can be a complex process even before you bid. We are here to help make your dream home a reality. If you are considering buying at Auction, get in touch, we would be happy to provide you with any advice before you decide to bid.