You've watched Homes Under the Hammer enough times to think it looks easy enough but what is it really like? Property auctions take place at auction houses and are usually frequented by property developers, those in the property trade and also potential residents looking for a good bargain.
The process of buying a property from an auction is very fast compared with the normal process. A property buy is usually completed in as little as 28 days after the auction. If you buy at auction you won't be subject to a property chain which can be a lengthy process. There's no need for estate agents either; your only port of call are auction houses.
There's a much bigger and wider range choice of properties to be found at auction sites which is ideal if you want to find something quirky and unusual.
A big bonus to buying at auction is how much money you can save! Properties sold via auction can be up to 30% cheaper than if it was sold on the open market.
Buying at auction is not for the faint hearted; although a much cheaper option than the more conventional open market there are many risk factors that need to be considered:
The majority of people who buy at auction are experienced property developers and not first time buyers as you have to make sure your finance is sorted before auction. When buying at auction you'll need to provide a 10% deposit on the day of auction you will then have 28 days to pay the remaining 90%. If you fail to pay in this time limit you will lose you property and also your 10% deposit. So come prepared - and rich!
Another risk of buying at auction is getting involved in a bidding war with other interested parties which can push the price up beyond it's value. To avoid paying more than what the property is worth establish a limit to what you are willing to pay and stay within your budget as it's all too easy to get carried away at auction. Also remember to include extra costs such as legal fees and stamp duty when working out your budget.
Always visit the property before the auction. Some of the properties found at auction are those which would not be able to sell on the open market. This could be because they are in such a bad state they cannot be mortgaged and can only be purchased by a cash buyer. Some houses may be severely neglected and need a lot of work done by someone who knows what they are doing.
On the same note you should always get a survey done before the auction but remember if you don't buy the property you won't get the money back. See one of our previous articles for more information on surveys.
House buying can take months and months on the open market but at auction it's all done in a matter of minutes! Once the hammer goes you'll walk away as a property owner. Buying at auction also means you won't become part of a lengthy property chain which can be a nightmare if one of the parties involved pulls out or asks for more money.
Properties sold at auction are significantly cheaper. The reserve price, which is the lowest offer the seller will accept can be 30% lower than the asking price on an open market. But properties can often exceed the reserve price.
Once the hammer falls the home is yours and no one can try to buy it from under you as they could on open market. No one can put in a higher offer after the auction and the seller can't demand more money.
Buying at auction is binding so only bid if you want the property and can afford your bid!
Always make sure to carefully read the legal pack about the property. This includes title deeds, local authority and environmental searches, fixtures and fittings which details what comes with house and a sellers information form.
Buying at auction means you don't have to deal with estate agents but you will have to pay the auction house an admin fee which is usually around £200 - £300.
If you're still considering buying property at auction make sure you do your homework and good luck!