Buying at Auction - What Cost a 'Bargain'?
Happily the property market is beginning slowly to recover and with the more clement weather, the market may see a further boost as investors review their portfolios and begin looking around for new investment opportunities. Sadly, not everyone has weathered the financial storms intact over the last few years and many have suffered the hardship of being repossessed. To realise their funds Lenders need to sell these repossessed properties relatively quickly and obtain the best possible return for themselves and the repossessed owners.
It’s often said that buying auction means you’ll get a bargain
Lenders will often sell properties at auction, either local to the property or in auction sales in London or Manchester where there can be in excess of 500 lots. It’s often said that buying auction means you’ll get a bargain but this isn’t necessarily the case. It has been known for two keen bidders to get carried away, resulting in the winning bidder paying well over the true market value for a property when there are similar ones in the area available at a much lower price. Even if a property is bought at a reasonable or even bargain price other issues, including structural defects or a defective title, costing significant sums to rectify, will push up that purchase price and may affect the saleability of the property in future.
When a property is bought at auction a legal commitment is made by the winning bidder to pay 10% deposit of the purchase price on the day and provide the balance usually 28 days after the auction. Don’t misunderstand me, auctions can be a great place to secure a good investment or, on the other hand, the house of your dreams. It is worth remembering that when an unusual or greatly sought after property is sold at auction, this being the best way to ensure all interested parties have an equal opportunity to buy, the interest broadens significantly.
To help ensure your success at a property auction here are my top tips:
- always view the property and get advice from a professional on its physical condition
- check the character of the neighbourhood
- get an experienced property lawyer to inspect the legal sales pack and advise on title and any additional conditions
- organise the finance for the 10% deposit and the balance of the funds – in case you are successful on the day
- set a budget and stick to it… to avoid being carried away on the day!