How to successfully buy a property at an online auction
Buying a property at an auction can be a fantastic way to take the first step onto the property ladder, but it can also be fraught with potential pitfalls for the inexperienced. And, while many auctions have moved online due to the Coronavirus pandemic, the same rules as physical auctions still apply. So, whether you are looking for an investment property to kick start your portfolio, or on the lookout for your forever home, we’ll show you how to bag a property bargain at an auction.
Always view the property
If the popular TV show “Homes Under the Hammer” has taught us anything, it’s that you really do need to view the property prior to bidding on it at an auction. It can be tempting to just look at the photos and information in the listing but viewing the property can show you the scale of the work needed and any potential problems. Virtual viewings have also become more popular and if you choose this option make sure you ask plenty of questions e.g., are there any signs of damp or mould?
Review the legal pack
The legal pack is an essential piece of information that has been prepared by the seller’s lawyers. Inside the legal pack will be details of the property relating to:
- Fixtures and fittings
- Lease or freehold details
- Land registry and local searches paperwork
- Restrictive covenants and any planning permissions
And while most legal packs are relatively straightforward it is always advisable to get a solicitor to evaluate the documents to help ensure there are no potential issues, especially if you are thinking of extending the property at a later date or if you would like to purchase the leasehold.
Arrange your finances before bidding
If your bid is successful you will need to pay a deposit immediately, this is typically 10% of the purchase price. The remainder of the purchase price is due within 28 days, which is often not enough time to secure a mortgage. There are a range of options available for noncash buyers including bridging loans which offer a short-term solution while you wait for your mortgage to be agreed and funds to be transferred. If you are unable to pay within 28 days, then you will lose your cash deposit and any other fees that you have paid.
Guide prices are notoriously low
Auction houses set property guide prices low in order to attract bidders. Make sure you take this into account when looking for houses at auction as the guide price will often be at least 10 percent lower than expected. It’s all too easy to be sucked in by the low prices and get carried away when at auction so always make sure you set yourself a maximum price that you are willing to go to and stick to it.
Auction properties can be found on websites such as Zoopla and Rightmove and also by doing a search for property auctions online. Remember, once you find a property to visit it in person where possible and to always do due diligence by getting a conveyancing solicitor to review the legal pack.