Buying at Auction
Posted: July 2013
By Jo Eccles
Buying a property at auction has increased in popularity recent months, and a lot of buyers have the perception that they can walk into an auction room and pick up a bargain. However, this is not always the case.
The problem with auctions is that you have to do – and pay for – your due diligence upfront, before the auction itself. For example, you need to pay for a building survey to be carried out and your solicitor needs to read through the legal documentation for each lot you’re interested in before the auction takes place. Therefore, you can face quite a lot of upfront costs, and if you keep getting out bid in the auction room, your costs have led to nothing.
Although some buyers take the risk and don’t visit the property first, this can lead to expensive mistakes. One recent auction buyer completed on a property, having only seen it from the outside, only to find it piled five feet deep in tons of stinking rubbish. This added significant delays and cost to his intended refurbishment.
It’s also important to remember that you need to be able to put down 10pc on the day and the rest has to be paid within a maximum of 28 days, with some auctions having a 14-day deadline. Having your finances in place is therefore imperative, especially as an auction bid is legally binding and you can’t change your mind.
Auctions are incredibly transparent as the price is dictated entirely by the people in the room on that day. There are very few sales tactics involved and it simply comes down to demand. One big benefit of auctions is that the sale is not going to fall through as the exchange takes place there and then, in stark contrast to the regular sales market where a purchase can take weeks before exchange, and throughout the purchase, the buyer risks being gazumped or the seller changing their mind and deciding not to sell – we’ve seen a few cases of this recently and it’s incredibly frustrating for all involved, not to mention the fees wasted in the aborted transaction.
For further information call 020 7244 4485 or go to www.sourcingproperty.co.uk
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