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Buying property at an auction can be beneficial for property buyers in many ways. It offers property buyers with an opportunity to purchase a property at a rate usually much lower than standard market rates. Property auctions can be beneficial for independent buyers as well as commercial property investors looking for good deals on properties.  However one needs to be careful when purchasing at an auction. If proper care is not taken, buying property at an auction can cause problems that could have been easily overlooked with proper planning and knwoledge.

Due to the ongoing recession and downturn in property market over the past 18 months, house prices in UK have fallen continuously. Although all in all the decline in the property market negatively affects most home owners and property investors, the falling house prices can provide opportunities for those wishing to profit form lower f prices.  Lower prices can be seen as a good time to purchase or invest in property if finance is available.

Most property buyers look at estate agents for buying a property. However there are other sources such as Property auctions that can prove beneficial financially.

In addition to properties sold by Estate agents in UK, approximately 30,000 properties are sold every year at various property auctions across the UK. Properties in auction can often be purchased at a much lower rate than the prevalent market rates as a quick sale is often required by auctioneers. Quite often it is possible to purchase a property at more than 30% lower than the usual market rate charged by buying via Estate agents.

Property auctions often also offer a wider range of properties for sale including properties such as churches, village halls and commercial lots available for sale with potential for change to residential use. As an individual buyer however, you may find your self in competition with other professional property developers or Estate agents.

Buying property at an auction requires careful planning, attention to detail and some knowledge of the action process. If you are successful in purchasing a property a an auction, the rewards can be priceless.

However purchasing a property at an auction requires careful planning and groundwork on your side or else buying at an auction can quite easily turn into a nightmare and something you will regret later.

Property advisors often advice buyers to take notice that sometime properties that are being auctioned may seem attractive at the start but may suffer from hidden extras such as dry rot, planning restrictions, or even structural damage to the property being auctioned.

Buying Property at Auction - Getting started

Over a 100 independent organisations in UK are involved with managing residential property auctions. Some estate agents also hold property auctions at fixed times during the year. Some estate agents hold up to 12 auctions per year while some hold only a few.

According to an estate agent, the demand for all types of properties is high at auctions. There is a well-established market for houses and flats at auction that mainly require some form of refurbishment or repairs.

Many established property auctioneers produce and distribute up to date catalogues for their auctions listing details of each and every property available at the auction for purchase.

On an average each property being auctioned is advertised about three weeks before the auction date. Potential buyers are able to inspect the property in this period should they require. This can be easily arranged by contact in the estate agent or auctioneer.

If you are interested in buying a property at an auction you are highly advised to inspect the property before hand during this inspection period.
You should also check the surrounding area and neighbourhood to make sure it appeals to you

If you then decide to bid for the property, you can let the auctioneer know your intentions so the know you are serious about the property. This way they can keep you informed of any latest developments.

This is also a good time to get the property surveyed by a qualified property surveyor and also to contact a solicitor who will check the details of the property. You should also try to arrange any required finance in advance.

The successful buyer will be expected to complete the purchase within a certain period after the auction. This is usually 28 days after the auction. You must also be prepared to insure the property from the moment the gavel sounds.

Set your highest bid

Budgeting is important when bidding for a property at an auction. You should plan your finance properly and estimate the highest you are able to pay for the property in question. When estimating your budget you should also include the total costs of repairs, decorating, legal and surveying fees, removals, mortgage and any other expenses you may incur on the property. Based on all this information you can easily decide what is the highest you should bid at the auction.

You should also take into account any hidden extras in terms f costs such the standard  1.5 per cent buyers premium that is likely to be added to the total selling price of the property. Similarly you should also account for stamp duty that you will have to pay for the property purchase.

Pre-sale price estimates are often below the final sales price in order to make the property attractive for buyers at an auction. They can fluctuate throughout the pre-sale period so keep in touch with the agent for regular updates. The guide price – usually set on auction day – is normally within 15 per cent of the reserve price, which is the minimum price the owner will accept. Once the reserve has been met the vendor is legally obliged to sell the property to the highest bidder.

Auctioneers are trained to increase the price of the property slowly but consistently at auctions. Bids tend to go up in £5,000 jumps, then £1,000 and £500. Auctioneers are professional ad will try to get the maximum bid for each property being sold at the auction even if the guide o reserve price may have been reached already.  You should be careful at bidding at auctions because you are legally obliged to purchase the property if your bid is successful.  You will be asked to pay a sum immediately using a draft or check.

Two golden rules for buyers buying property at Auction

• First, do your Groundwork and research well in advance of the auction – Find  answers to all your queries and seek clarification wherever required.

• Second, at the auction, stay within your limited budget. You should have already planned and set your maximum limit before attending the auction. It is important that you do not exceed your budget and stick to it.

Tips For Buying Property at Auction:

Try to attend an auction before you start bidding yourself. It helps to know the ropes and will also help prepare you against the kind of auction fever that ends in you bidding far more than you originally intended.

Check with local estate agents to see what similar properties have sold for.

Be prepared to pay for a survey – even though you may not end up winning the auction. It could save you a great deal of pain if you uncover hidden horrors like subsidence, or structural problems. You could also invest around £150 in a formal valuation from a mortgage lender.

Check out planning permission details with the local authority and look at any the legal packs held by the auctioneer. These should contain details of deeds, leaseholds and access. If you get the legal pack in advance and are uncertain about something, ask a solicitor.

Make sure you are able to pay – if you don’t have the finance ready in time, you will lose the deposit.

On the morning of the auction, check that the property is still available. They can be withdrawn or sold privately at the eleventh hour.

Finally, if you are desperate for the property you can make an offer before the auction. Most vendors and auctioneers will happily accept if it is high enough