Tips for buying at auction
Buying an investment property at auction can be a great way to snap up something well below market value. With online auctions making it easier for property to be sold quickly their popularity is on the rise but you need to ensure you’re prepared before you raise your hand, or more likely in our current virtual world, click your mouse to avoid things going horribly wrong.
Here are our six top tips for anyone new to property auctions.
Inspect the property prior to the auction
You wouldn’t buy a new home without looking at it first would you? Google street view will give you a feel for the place, but invest the time inspecting the property and its surroundings thoroughly. Any savings you muster in a fantastic deal at auction can quickly dwindle if you unintentionally buy more of a ‘fixer-upper’ than you had budgeted for.
Review the legal pack
Better yet, ask your solicitor to review it for you. We have had clients find a major unknown issue with the title, or found their completion deadline is shorter than the standard 28 days. This information will be detailed in the legal pack so you should always read this before placing a bid. If the vendor doesn’t provide the legal pack with enough time prior to the auction taking place, think about why they might have done this.
Do your homework
Particularly if you’re looking to buy in an area that you’re not familiar with. If a property seems like a bargain compared to others a few streets away, it could be for a reason. Speak to the auction house and other agents in the area to find out whether there are certain areas – or even certain streets – that you should avoid.
Know your limits
Be strict with yourself. If you’ve done the right research in advance, you should know the maximum price you want to pay for the property. If you’re not buying cash, then your maximum bid may be determined by the amount of finance you can access. Always take the time to speak to a reputable broker before the auction to establish the maximum you should be bidding. We’ve seen many cases of clients coming to us source bridging finance when they find a large hole in their finances and just 28 days to fill it.
Can I get finance?
The most effective way to make money on a property is to buy one that you can add value to. This can range from a bit of decoration to a full structural reconfiguration, so you should make sure that you can get finance BEFORE you place a bid. In most cases, lenders are happy to allow for a little bit of redecoration but anything more than that and you may find yourself with limited options to fund your purchase. You can contact us to review the property in advance to get an idea of whether finance is likely to be agreed and, if so, if our deal optimiser service can negotiate an even lower rate. This can make the difference as to whether an investment works or not, and can be the difference between losing your deposit or not! One of the crucial considerations when buying at auction is the extremely short window for completion. You really must ensure you have finance arranged beforehand. Whilst some lenders can work quickly, it’s not always possible to meet the stringent completion deadline and you may need to rely on short-term finance in the form of a bridging loan. Knowing which lender to use for this type of finance can save thousands so ensure you visit propp.io/bridging where you can view the rates of all our lenders without having to submit any personal information.
Finally, take your time
Go along to some auctions and just watch to start with. A practice run if you like. This couldn’t be easier with online auctions being the new norm. It can be tempting to jump on a “bargain” on your first auction, but don’t! Yes, we know – Bah Humbug. But if you purchase a property you haven’t conducted fair due diligence on you run the huge risk of coming up against surprise costs, turning that ‘deal’ into the most costly mistake you ever made. Chances are, if a deal looks too good to be true – it probably is. The key to success at auction is understanding how it works and getting a feel for what properties are selling for, but most importantly watch, learn and have fun!