Over the past couple of years, the property market has been booming and properties sold at auction are no different. Google has seen a 50% increase in searches of ‘property auctions’ over the past 12 months and interest in this area does not seem to be slowing down. Most property auctions have now resumed action in person with many buyers and sellers alike enjoying being back in the buzz of the auction room. However, in what is still considered a sellers’ market with some auction houses going for £30,000 more than the expected price, is it ever a good idea to buy property at auction? Keep reading to find out more about the pros, cons and how to prepare for bidding.
Should I buy at auction?
Buying property at auction may be growing in popularity but this does not mean that it is the best option for every buyer. However, there are some notable advantages. For example, most people associate property auctions with getting a discounted price and often this is true. Some homes can sell for as little as 70% of their market value which is a bargain if you are willing to put in the work they so often require. You may find that there is less competition to buy a property in this way compared to the traditional buying and selling process but you should be wary of going up against more experienced buyers in the form of property investors. Scottish cities like Aberdeen do not see as much interest when it comes to property auctions compared to the rest of the country so if you are open to different areas there are deals to be found. Finally, buying a home at auction is a good way to speed up the buying/selling process if you are in a rush. You might be surprised to hear that even first time buyers can get in on the auction action – as long as you have a mortgage in place, a deposit and set your budget, the auction world is your oyster! This could be a great way to invest in your first home as there is more potential to add value.
What to consider beforehand
If this has got you considering buying a property at auction here are a few things to consider before jumping right in. A good way to get a feel for the auction process is to attend an online event. Auctions of any type can be nerve wracking, especially if a lot of money is at stake so this is a good way to see what it’s like and build up your confidence. Before you attend an auction make sure to thoroughly research the properties in the auction catalogue. Auctions typically take place 4 weeks after the catalogue is released so make sure to arrange viewings within this time and take along a builder or someone who can give an estimate on additional costs. The importance of setting a budget and sticking to it cannot be overstated. Although buying at auction is often cheaper, remember that renovations are more common and you will need to have the deposit ready for the amount the property sells for so factor this into your costings from the get-go.
What to do at the auction
Once you have considered these points, it’s time to get bidding! Arrive at the auctioneer’s ahead of time as sometimes additional information or changes to a property may be announced. Remember that the guide price is where the bidding will start and most homes also have a minimum reserve price set by the seller. The reserve is not disclosed to the bidders but it can be up to 10% higher than the guide prices so take this into account when setting your budget. If the idea of bidding does not appeal to you, an agent or solicitor can bid on your behalf. Last but not least, if you make the winning bid you are bound by the Terms and Conditions – you must sign the contract then and there, be ready to pay the deposit and have two forms of ID with you.
It is clear that buying property at auction can be a worthwhile approach to take when purchasing a home. Whether to live in, rent out or flip for a profit, auction properties can often be purchased at a discount price and so there is profit to be made. Just remember at when the gavel falls there’s no going back so don’t take buying at auction lightly! For more property advice, get in touch with the team.
