Forget estate agents...why not buy a home at an auction?
You could get a property with a difference and pay a lot less for it when the gavel falls, as Chiara Cavaglieri reports
Saturday 30 November 2013
Buying property has become a stressful prospect in some parts of the UK with fast- rising prices and a growing trend for gazumping and sealed bids. Most house-hunters turn to estate agents and property websites which list the vast majority of homes for sale, but could you find a better deal at auction?
Buying at an auction house has some serious benefits, not least because there is no property chain and once the gavel falls neither party can back out. But with the traditional route there is typically around 12 weeks to wait after an offer has been accepted before contracts are exchanged, during which time you can be gazumped by another buyer or the seller can change their mind.
Many people go down the auction route because they are on the hunt for cheaper, quirkier properties and buildings in need of renovation work. You can usually find a much wider selection of property types than you would normally get through an estate agent - for example, many councils use auctions to offload properties. Owners might also be in a rush to sell and therefore willing to accept a lower offer than they would otherwise. If you’re really lucky and nobody else is interested in the same property as you, it could be yours on the first bid.
Karelia Scott-Daniels of Manse & Garret Property says that properties typically sell for around ten to 20 per cent below market value: “Buying at auction is not possible for many people who are already in the housing market because you need to put down a deposit on the day, typically ten per cent of the price. It is however a great way for first-time buyers to buy something below market value where they can add even more value through renovation.”
The first step to buying at auction is to request a catalogue featuring the properties up for sale, along with information and guide prices for each lot. The auctioneer and the vendor work together to agree on a guide price (which is usually set low to try and stimulate interest) and a confidential reserve price (the minimum price which the vendor will sell at). It’s a good idea to sit in on a few auctions first to get a feel for the process and atmosphere.
You need to get your finances in order before auction day, so if you’re getting a mortgage you need an agreement in principle from your lender. You may even want to get buildings insurance lined up because you are liable for any damage as soon as your bid is accepted. Don’t forget to include stamp duty and any fees in your calculations – you may need to pay a buyer’s premium on top of the hammer price and there is an administration fee of around £150 to pay the auctioneer.
Your solicitor should also ask for a legal pack from the auctioneer. This will include details of the property’s entry on the Land Register and any other environmental and local authority searches. But you also need to check for any special conditions which could seriously impact the cost, for example you may be required to pay the seller’s legal fees.
If you do find a property that you want to bid on, be realistic about the price it might fetch. Auctions are becoming more popular, and as there is a general lack of stock coming to market more buyers and investors are widening their searches to auction houses.
Never forget that if you put in a winning bid you are legally obliged to see the purchase through. The timing is both part of the appeal to buying at auction and a potential headache – successful bidders must put down a ten per cent deposit on the day and then, generally, they have only 28 days to complete the transaction.
If you’re not paying in cash, by far the biggest peril when buying at auction is the fact that mortgage lenders are not contractually tied to you. So, although buyers are legally obliged to pay up once the gavel falls, the bank can pull the finance the day before completion which could mean you lose your deposit if you can’t arrange another loan in time. Similarly, if you overbid and there is therefore a gap between the lender’s valuation of the property and the price you pay on the day, you will need to cover the shortfall from your own pocket.
With so much at stake, it’s more important than ever to put your own safeguards and checks in place.
Adam Lewczynski from chartered surveyors London Property Investments says: “It’s down to the buyer to carry out his own due diligence which I believe should include a survey, valuation and thorough investigation into title, leases and other issues usually carried out by a lawyer. In reality, however, few buyers want to spend thousands of pounds carrying out the survey, valuation etc in case they are not the successful bidder”.
At the very least, go and visit any properties you like the sound of (the catalogue will usually mention allotted viewing times closer to the auction date). Never bid on a home you haven’t seen because any number of things may not be mentioned in the catalogue. If the building looks like it needs a lot of work, a structural survey will uncover hidden problems that could cost you an arm and a leg later down the line.
On the big day itself, read the “addendum sheet” very carefully as this contains details of any alterations to the original catalogue listing – be warned that changes could be as major as a correction to the number of bedrooms! Once the auction is underway, do your best to stick to your maximum bid and try not to get carried away.
“Psychologically, auctions can encourage recklessness, and mistakes can be made,” says Jo Aldridge of Stacks Property Search. “If the result is a rather tatty second- hand designer coat, you can put it down to experience. But the pain involved in making a bad property buying decision is less easily forgotten.”
Contact the auction house to request their catalogue. Research previous auction sales for similar properties to gauge demand and value.
Ask your solicitor or conveyancer to carry out the usual searches/title checks and arrange an inspection of the property (this will be done through your lender if you are taking out a mortgage).
If you are going to bid on a property you need to register and bring along two forms of identification as well as your solicitor’s details if you have appointed one.
Arrive early so that you have time to ask any questions. Check jargon at auctioneers.org/glossary.
Above all, set a price limit and stick to it!
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Russell Brand accuses FOX News anchor Sean Hannity of terrorism after aggressive Israel-Gaza debate
- 2 Pope Francis issues top 10 tips for happiness
- 3 Disney heiress Abigail disowns her share of family profits in West Bank company
- 4 The secret report that helps Israel hide facts
- 5 Now diplomacy has failed, boycotting Israel might be the only way we can protect the people of Gaza
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...
£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...
Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...
£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...
Day In a Page
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000