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Advice for Buying a Property at Auction

Buying property at auction is a pleasant change from the conventional methodologies but at the same time it is equally important to carefully bid property at an auction. There are few basic guidelines to consider when buying properties at auction. Before getting started search for appropriate auction house listing properties you are interested in and request for their catalog. Auction houses generally organize regular auction sales with printed catalogs few weeks in advance. Subscribing to catalog mailing list is another option. This will give you an overview for the motive behind the property is being sold and the mortgage details of the property. Read the catalog carefully and go through each and every detail provided. Mark all the properties you are interested in buying.

It is always recommended to attend an auction as an observer to get the real feel and to understand its modus operandi. Request from the auction organisers for the auction pack and the auction you have decided to attend. The auction pack encloses information like the title deeds, seller’s information form, local authority and environmental searches, lease details in case of leasehold property. In addition to the legal checks it is important to visit the property in person. Research on the property intensively and inquire through neighbors and local estate agents. Hire a qualified property advisor to carefully examine the property for spotting structural problems. After you finished the survey of the property crosscheck with the descriptions provided in the catalog.

The next step involves carefully planning the accurate costs. It is important to consider additional costs as costs of survey and legal advice, finance arrangement fees, stamp duty, remodeling and renovation costs, buyer’s premium if any. These costs if not considered might consume most of your margin and in worst cases you might end up paying from your own pocket. Carefully read all the contract and auctioneers terms and conditions mentioned in the catalog. Minutely examine all the details or seek legal advice from a solicitor or a chartered surveyor. Get the money required for deposit arranged in advance. You are required to pay 10% of the cost of the property on the auction day when the contracts are signed and remaining balance to be paid in full within 28 days. If you need mortgage assistance it is wise to plan ahead or you might end up losing the 10% deposit in event of non-payment of the required amount within 20 working days.

Allocate a fixed budget for yourself before entering the auction room. Be firm and decisive on how much you are willing to spend and do not get carried away by emotions in heat of the moment. You can also appoint an auctioneer or a solicitor to do the bidding for you. On the actual day arrive well in advance and get a nice seat for yourself so that the auctioneer can easily acknowledge your bidding signal. Keep your eyes open to your surrounding and carefully listen to the opening announcements. You are also required to carry a couple of identification papers and a cheque to cover the 10% deposit.

Buying a property at an auction can be fruitful if you sincerely follow the basic strategy. You might end up buying the best property at almost nominal price.

Jason Sands

  1. Anonymous
    June 13th, 2012 at 16:43 | #1

    Going to buy a property at auction but need some mortgage advice?
    Hi,
    I currently own a three bedroom house which has been for sale for quite a long time at £109.950. I expect I could sell it faster by dropping the price. I still owe £88,000 on the house.
    In a fortnight, I am planning to bid on a house at auction. The guide price of the house is £55,000 and it is in need of quite a lot of repair work (around £10-15k). I do not have anything in the way of savings.
    I was wondering how I can secure the house at auction… my maximum bid will be £85,000… if the house goes for more, then good luck to the successful buyer (as it won’t be me!!)
    I understand that you need around a 10% deposit to get a mortgage these days, so if I went to my maximum budget that would be £8,500. My current mortgage company also allow mortgage transfers, but I’ve been told by a friend in the trade that this will only apply if my new mortgage is equal or higher than my existing one. In this case the mortgage would be getting lower, so maybe they won’t let me do it?? Anyone know?
    How can I get the money I need if I win at the auction? Can I transfer my existing £88,000 mortgage even if I win for the £55k guide price and just use the excess for renovations? Or would a quick sale to one of these quick buy companies get my current house sold quickly? Or are there other options that I don’t know about?
    What I need here is someone in the know to explain to me what they would do in this situation and how they would go about it???
    Thanks, Jonathon

  2. ginger
    June 13th, 2012 at 21:45 | #2

    you need to speak to your banks mortgage advisor. I would not take such important financial and legal advice from some faceless person on the internet who could be telling you anything at all. Get the correct advice then at least you have some legal back-up if there is a problem. good luck.
    References :

  3. Kernow Lady
    June 13th, 2012 at 21:47 | #3

    Property Auctions in the UK require a large deposit on the day and money in place to complete within about 4 weeks. If you cannot complete within the time scale set, you will forfeit the deposit. There is no way you will get a second mortgage for another property unless you earn a huge amount of money. The cheap cash buy companies will give you about 50 to 60% of the value of your house. In your case it might not cover the money you owe.
    What you are thinking of doing is not possible. Why not phone an Independent Mortgage Advisor for some concrete facts.
    UK
    References :
    former Estate Agent UK

  4. thewaythingsare
    June 13th, 2012 at 21:49 | #4

    this is a huge ‘don’t’ – you are committed to buy the property if you win the auction, so you must get the mortgage agreed totally in advance. Speak to your current mortgage company but don’t expect them to say yes.

    you also need a deposit for the house available on the day – and you don’t have any savings. So you can’t do it.

    I would concentrate on building up savings, because at the moment you are stuffed if you lose your job and get ill – how are you going to pay your current mortgage then?
    References :

  5. SimonC
    June 13th, 2012 at 21:51 | #5

    My headline advice is DO NOT BUY AT AUCTION. You clearly are not up to speed with how property auctions work, so you would be MAD to bid until you fully understand what you are doing.

    In a "normal" transaction, you will make an offer then hand over to your solicitor. He will investigate the property (searches, survey, etc) and negotiate a contract with the seller. At the same time you will be applying for a mortgage for that specific property and the amount you need. You may have an "agreement in principle" already, but the lender still needs details of the property before they can make a formal offer.

    When you are happy the property is what you think it is, and you have a formal mortgage offer, the solicitor will exchange contracts on your behalf, usually handing over a deposit to the seller that the same time. You are then committed to complete the transaction and if you fail to you will lose your deposit and could be sued if the seller’s losses are more than this amount.

    When you buy at auction the moment the hammer falls is the equivalent to the exchange of contracts. You are then committed to buy. The auctioneer will expect 10% deposit to be paid there and then – and a lot of auction houses will have taken a sum on account of this before they even let you bid.

    So, if you need to buy with a mortgage, you must get the mortgage arranged before you bid. This means you will need to have a survey and certain searches that the lender will require. These will cost money, even if you then get out-bid. All your questions about how much you can borrow, whether you can port the existing loan, etc, will be answered by the lender while you are applying for the loan.
    References :

  6. honey
    June 13th, 2012 at 21:53 | #6

    A lot of auction properties are un mortgageable that’s why they are being sold for cash.
    You need a large deposit on the day and pay the balance very soon after.
    References :

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