Buying property at auction is an exciting method of a purchase but it comes with its own unique risks. Here are five matters to consider but remember, this list is not exhaustive!
This blog looks at buying at a traditional auction. A further piece on buying through a modern auction method will follow.
1. Do your research. What is your budget and where would you like to live?
As with buying from traditional estate agents, before you go to view properties, it’s a good idea to get a budget in mind. What can you afford? Can you get a mortgage or other finance? It’s worth remembering that some of these properties may need substantial work. Ask questions. Why is the property up for auction? Is there a simple explanation like a lender repossessed it, or has it been stuck on the market for 2 years because it smells of damp, is infested with woodworm and has Japanese Knotweed in the garden Also, it’s not uncommon for Auction Contracts to make the buyers pay the seller’s legal fees and reimburse them for searches.
Where would you like to live? It’s a good idea not to buy for the sake of buying or for the novelty of buying at Auction. Remember, either you will be living there and putting down some roots or you will be hoping to let it out for a good tenancy yield. What are the local schools like? Where is the railway station? How close is it to the motorway? Is there anything that may put people off this property nearby? These are all questions amongst others which you should consider.
2. View the property
It sounds obvious but you would be surprised how many people go along to an auction, stick their hand up and purchase without having viewed the property. This could work for you but it is a risky strategy. The property may suffer from various defects, either in structure or legal title. Remember, once that hammer falls it’s your property and you are legally obliged to complete. Also, do you know the area? It may sound silly but Salford Quays is not coastal. It’s in Greater Manchester. Were you expecting a seaside location for the tourist market? It’s worth considering.
3. Don’t get ‘Auction Fever’
Auctioneers are experts at ramping up the crowd and encouraging ‘just one more bid’. Remember that by and large, the auctioneer works for the seller. It’s their job to get as much money for the property. Always bear in mind that buying property at Auction is not a game. Try not to get too competitive with any of the other bidders. It’s not a personal battle or an insult if someone outbids you. Stick to your budget and if it goes over it, be prepared to let the property go. There will be others. Remember, if that hammer falls, you’ve got to fund the completion somehow!
4. Download the legal pack
Most traditional auction houses now have websites and make sellers offer certain documents to be available such as the Title Documents, Searches, Property Information Form, Fittings and Contents form together with details such as whether the property is Freehold or Leasehold or whether it is currently tenanted. If it’s tenanted, you should be able to see the tenancy agreement and how much that tenant pays. Does this fit with your plans and thoughts? Some people will feel comfortable with these forms but if you do not, seek legal advice.
5. Speak to a specialised Conveyancing Solicitor
This is very important. Preferably you want to speak to someone who has experience with dealing with auction sales and purchases. Don’t be embarrassed to ask! This person is a professional with your investment in their hands! Consider asking your solicitor before you go to the Auction what their fees will be if you are the successful bidder. Also, if you are serious about a property, ask whether they can agree a fee with you to review the online legal pack and prepare a property report for you. Perhaps consider agreeing that the report will be so much on its own, and if you are successful, how much it will be to complete. Remember, knowledge is power in the Auction game!
If you require assistance with buying a property at auction, please call Ashley Mallett on 0113 284 5153, or alternatively email ashley.mallett@isonharrison.co.uk
