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You are here: News » Archived News » Top 10 tips for buying property at auction

Top 10 tips for buying property at auction

Property Auction

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Sharing her top tips for buying at auction is Amy Schofield, Auction Sales Manager at Together, which provides short-term finance for auction purchases: “More and more people are feeling empowered to go out and buy at auction, and its thanks to the rise in popularity of being able to bid online. Online auctions offer more control for the buyer, you can see the number of people you’re bidding against in a more anonymous way. The most important thing for would-be buyers to have in place ahead of attending an auction, either live or online, is a ‘Decision In Principle’ on the property that they are looking to buy.

“Not all lenders will fund properties sold at auction – add to that, a buyer can find themselves financially in trouble if they cannot complete on their purchase within 28 days of winning their bid.”

  1. Always read (and understand) the legal pack
    When we first started talking about the biggest mistakes that our team had seen, one reoccurring winner emerged; bidders simply don’t read the legal pack. Essentially, the legal pack is a set of documents prepared by the seller’s solicitor containing all the essential information about the property. It will be available freely to download via the auction’s website, and, if you register with Essential Information Group (EIG), you can get notifications if the pack on your chosen property changes before the auction – even on the day!
  1. Find a solicitor who is familiar with auctions
    It’s vital that the solicitor you use knows that you’ve got a quick completion period, whether that’s seven, 14 or 28 days. They need the experience and capability to work to those timescales. Your solicitor should also be Solicitors Regulation Authority (SRA) regulated, and aware they will act as dual representation in most purchases.
  2. Keep calm
    Auctions can be very competitive, with auctioneers skilled in getting the best price possible and lots of properties often going for way over the guide price. It can be easy to get caught up in the action. Avoid this mistake by keeping calm, and going into the auction with your absolute maximum budget in mind.
  3. Get your finance approved before auction
    Another thing that can help you keep calm and focused is having your finance sorted before entering the auction room. Knowing how much you can borrow, the types of properties that you should focus on and your affordability beforehand will stop you making costly mistakes. No more paying way over the odds and then worrying that you won’t be able to find the funds required to complete the purchase.
  4. Beware of the ‘six-month’ rule
    Auctions are a great way for investors looking to make a profit. Buying and redeveloping – popularly known as ‘flipping’ – is common, as auctions have a shorter completion period and a higher certainty of sale. However, as the vendor may have only owned the property for six months or less at the point of sale, it can make getting a mortgage on an investment or Buy to Let property harder for the winning bidder, especially when applying for finance with many of the high street providers. Make sure you do your research before the auction.
  1. Check the completion period
    At a conditional auction, you’ll typically get 28 days to complete the purchase. Getting funds fast can be tricky, and buying the types of buildings typically available at auction, like non-standard properties, can add additional complexity to passing lending criteria. With a non-conditional auction, you’d get 28 days to exchange and an additional 28 days to complete. If you aren’t able to meet your initial completion date, you would most certainly lose your deposit in addition to further fees.
  1. Visit the property
    Although the legal pack does give a great indication of some of the challenges, you can only really see the condition of the property in person. If you aren’t allowed to visit the property, you should definitely question why. There may be issues with the building that the vendor doesn’t want you to see. A viewing is also your opportunity to ask questions or assess any known issues, such as the extent of damp. You should also consider visiting the area around the property at different times of the day to get an accurate feel for the location.
  1. Investigate tenancies
    Is the property you’re planning to purchase currently being rented out? Take the time to find out some background information about both the tenant and the tenancy agreement. Assured Shorthold Tenancies can cause issues for finance with some of the big lenders.
  2. Get to know your auction house
    Get to know your local auction houses. Some may have more lots on offer for the property type that you are interested in (at better prices), and others may simply make you feel more at ease with their methods or atmosphere. If you might enjoy the buzz of the action, you should definitely go along to a few auctions first. Get a feel for the environment and experience, and get to know the people that work at the auction house also; They’ll be able to advise you on any property that you’re thinking of buying, or could help you with the sale if you are looking to flip it again once refurbished.
  1. Look for unsold lots
    Most lots will have a reserve, which is the minimum price the vendor will accept for the property. If a reserve price is not met, the lot will be withdrawn. However, at the end of the auction the vendor may agree to sell the property at a lower price. Ask the auctioneer if you can register your interest for such properties and you may find yourself with a last-minute win, often at a bargain price.
Amy Schofield, Together Money
Amy Schofield, Together Money

Amy Schofield
Auction Sales Manager
togethermoney.com

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