Buying at auction
By Jo Eccles
Q: I’m thinking of buying my next property at auction – what do I need to be aware of?
A: Buying at auction can be a great way to purchase your property. One of my colleagues is our in-house auction specialist and he has handled some really exciting purchases for clients over the years but, as with any channel of buying, you need to know what you’re doing. There is a lot of psychology involved in auctions that buyers aren’t always aware of, everything down to the timing of the bid and even where you position yourself in the auction room.
When deciding to buy at auction, you have to be realistic about what you can offer; properties rarely sell close to the listed guide price so make sure you have done your research and have a budget to exceed this. Also be sure to have all due diligence and legal documents in place beforehand, as well as access to the necessary funds – this includes the 10% due on the day and remaining funds are typically required within 21 days of the auction date.
A typical auction property also tends to require refurbishment works and this is one of the top reasons buyers are attracted to them. So, if you require funding, check with your lender before you bid on a property; lenders have specific criteria which the property must comply with for lending purposes and auction properties may not always meet these specifications.
You also need to do your research and have a good understanding of the bidding process; contrary to common belief, properties sold in auctions aren’t always bargains. Many people buy at auction nowadays so you can easily be bidding against others in the room who may not be properly educated on prices and they could, therefore, outbid you. This can be very frustrating as your upfront legal and finance costs paid ahead of the auction will be lost.
However, it does also have its benefits and once your offer has been accepted, you don’t have to worry about the sale falling 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. This takes out the possibility of being gazumped or having the seller change their mind at the last minute.
It’s not for the faint-hearted or inexperienced buyer, but it’s definitely a great route to consider.
If you have a question you’d like Jo to answer please email firstname.lastname@example.org or tweet her @joeccles.