As with anything, there are benefits and pitfalls of buying a property at auction. We review the pros and cons to help you decide if buying at auction is the right way to find your dream home.
Benefits of Buying a Property at Auction
It's much faster - You can complete the whole process from auction to completion in a few weeks. Once you're the winning bidder, contracts are exchanged there and then. You will pay 10% of the purchase price as a deposit on the day of the auction and as you have exchanged contracts, there is no backing out.
Completion is likely to happen within one month of the auction. When you compare this to the normal house purchase timeline, which can take anywhere from 6 weeks to 8 months in very complicated situations, it seems a really great way to buy a property quickly.
You can't lose the property – gazumping has made an unwelcome return into the property market and by buying at auction, you can make sure that as long as you win the bidding, you will get the house you want.
Visibility on the price – if you know you are bidding against someone else for a house, the usual process employed by estate agents is to request sealed bids and the highest bidder gets the property. At auction, you see exactly who else is bidding and you will only pay an incremental rise above the other person at each step. This gives you visibility on price that you wouldn't otherwise get.
It's easy to do – you can turn up on the day, with some ID, your 10% deposit and your Solicitor's details and you can buy a property. You should always ensure you have done your due diligence before the auction though. View the property a couple of times before the auction, get your Solicitor to check over the legal pack and get a survey done on the property before you buy. You can cause yourself big headaches and big bills to pay if you don't do all of these steps.
You may have more choice – there are many different auction houses around the UK and by buying at auction you may get more choice. Gone are the days when the only properties that were available at auction were repossessions and property that has issues, such as a non-standard construction. Make sure you get a copy of the auction house's catalogue so you can spend time reviewing properties and complete all the work you need to do before the auction.
Decide how to bid – you may love the hustle and bustle of the auction room or you might prefer to get someone else to bid for you at the auction. With many auctioneers you can also bid from the comfort of your sofa on your computer, smartphone or tablet. Discover what you prefer by doing a test run at an auction you don't want to buy at. This will help you to understand your preference.
Pitfalls of Buying a Property at Auction
It's very quick – this is obviously a positive aspect, but when you are trying to get the Surveyor on site and provide you a report a Solicitor who can review and advise on the legal pack and the mortgage company to work to a very tight deadline, the process can be very stressful. There are some things you can do to try to prepare in advance. You can agree a mortgage offer in principal. This will allow you to know how much you can borrow from the mortgage company and be ready to go ahead once you've won the property at auction.
You must have 10% on the day – be ready to produce 10% of the purchase price at the auction. This could be a stumbling block, so go into it with your eyes open and be prepared.
Watch your budget – it is very exciting at auction and when you've seen a property you want and spent the money on the survey and legal work, you will feel a lot of pressure to keep bidding even if it is more than your budget. Set a budget before you get to the auction and stick to it, no matter what. After all, you don't want to be suffering from buyer's remorse rather than celebrate your new home do you?
Never impulse buy – buying a property at auction without having the legal pack reviewed or having a survey done is a bad idea. You have no idea what you are letting yourself in for. Therefore, an impulse buy at an auction is a bad idea.
You can see there is a fair balance of pros and cons to buying a property at auction. Only you can decide if it is the right move for you.
At Co-op Legal Services we offer fixed fee conveyancing services for properties in England, Wales, Scotland and Northern Ireland and all conveyancing quotes include a No Sale No Fee Guarantee.