How to buy a house under the hammer
It’s possible to pick up a bargain at a property auction – if you know what you’re doing, explains
AS the housing market continues to stutter, some potential buyers are turning to auctions to try to find their dream home.
And with the number of properties being sold this way up nearly a quarter compared to a year ago, there are bargains to be had.
David Sandeman, managing director of property auction specialists, Essential Information Group, said: “Many people choose to buy at auction, as opposed to using estate agents, as it sometimes means they are lucky and get the property at below market value.
“The other benefit of buying at auction is the fact that many of the properties are unmodernised, which allows the purchaser to improve them how they want, something that many people prefer.
“Some people appreciate the speed of the sale, but you should be aware that you could spend a lot of time and money on due diligence researching the property, only for someone to outbid you on the day.
“It’s therefore imperative that you understand that the guide price quoted is only an indication of where the reserve price is set, not what the auctioneers necessarily think the property will go for.”
Buying at auction isn’t for everyone, but if you have cash in the bank and you are willing to follow a few basic steps and do your homework beforehand, you could be pleasantly surprised at the wide choice of properties available.
Jonathan Thompson, senior mortgage manager at Leeds Building Society, said: “If you are thinking about buying a property at auction there are certain things you should always do.
“First, it’s essential that you view the property before the auction.
“It also makes sense to arrange a survey to ensure the property is structurally sound, and speak to your lender so you know how much they would be able to lend you.
“Once you have done this you will be able to attend the auction and bid for the property with real confidence.”
Here, Jonathan outlines the six key steps to buying at auction...
Step 1: Find a local auction
Decide on the area you are interested in then contact your local property auction houses.
Many estate agents hold regular auctions so once you know where you want to buy, get on their mailing lists so they can alert you to properties coming up for sale.
There are lots of online sites where you can find out about forthcoming auctions and properties, such as Essential Information
Group (eigpropertyauctions.co.uk), which holds information on almost every property coming to auction.
It is seen as the Rightmove of the auction world.
One of the benefits of registering is that many properties coming to auction have been to auction before.
Almost a third of lots have this status and the site will be able to tell you if that’s the case and what happened to them.
You can also submit details about the property you are interested in and it will show you the details and similar properties for sale in that area.
Typically, auction brochures are produced about a month in advance and the prices quoted are guide prices.
These are usually set within 10% of the reserve price, which is the lowest price the seller will accept.
The guide and reserve prices are liable to change. Do not rely on the guide price as an indication as to what it will sell for.
Step 2: Know what you can borrow
If you are successful in buying a property you must pay 10% deposit as soon as the auction finishes.
It’s essential therefore that you have spoken to your lender beforehand so you know what you will be able to borrow from them.
By doing your homework before the auction you will know that you have mortgage funding available and are all ready to go.
There will also be additional fees to pay, so make sure you find out how much these are too.
Step 3: View the property
Make sure you view the property at different times of the day.
Check out the area – what are the schools and shops like? Is it an up-andcoming area and what are the transport links in the surrounding area like?
Useful websites for research include landregistry.org and zoopla.co.uk
Step 4: Get a survey and legal work done
You should always get a survey done ahead of the auction. This will highlight whether there are any major faults with the property.
The lender will need a survey if you are successful, so a useful tip is to check with your lender which surveyor they will use – thereby cutting costs.
Get your solicitor to go through the property information before the auction to make sure there are no hidden legal clauses you may not be aware of. Always take a very close look at the Special Conditions of Sale as these often contain clauses requiring the purchaser to pay additional sums.
Step 5: At the auction
Once the hammer drops, you are legally bound to buy the property at the price agreed
On auction day it’s also worth checking the addendum to the auction catalogue as this will list additional information or if there are any changes to the property.
If you are attending the auction in person, sit where you can see what is happening and who you are bidding against.
Decide your budget and stick to it – if the bidding is fairly slow, don’t show your interest too early.
Whatever happens, don’t get carried away by the excitement of the event – remember once the hammer drops, you are legally bound to buy the property at the price agreed.
Step 6: Going, going, gone
If you are successful in buying the property, then you will have a lot of work to do after the auction.
You will need to hand over the 10% deposit immediately, then you will need to finalise the mortgage details with your lender as well as completing the legal work.
Once that is done, the house is yours and you can crack open the champagne.