Buying a property via auction is an exhilarating experience, and it’s an effective way to expand your property portfolio whilst gaining experience in property development.
As Benjamin Franklin once said “failing to prepare is preparing to fail”, and this rings true when it comes to buying properties at auction. So to help you prepare, we’re going to go through our top tips for purchasing an auction lot.
Learn the auction process
It’s essential to understand how an auction works and what financial implications come with bidding and winning at an auction. To ensure you can compete in a bidding war with confidence, we recommend you watch a few auctions before participating.
Watching an auction before you jump in allows you to familiarise yourself with the excitement, process and speed of an auction, and gives you an opportunity to register with the auction house and ask questions about the auction houses’ purchasing system.
Financial preparation for auction
Getting to know the financial implications that come with buying a property at auction is crucial – especially for first-timers, as once the hammer drops, the property is yours and the tight payment timeline begins!
When you win a lot you’re bidding for, online or in person, you will be expected to pay a minimum of 10% deposit upfront and then you will have 28-days to complete the purchase by paying the remaining balance in full.
Researching how to get finance for buying a property at auction can be a long and complex process, but with Velocity Bridging, we’ve simplified auction finance from start to finish with our swift processes and market-leading 90% Auction Finance.
Research the property and area
What good is a beautifully renovated property if it’s in an undesirable location? Researching the area in advance of the auction can help you determine if the property is worth your investment and whether you’ll be able to follow through with your exit strategy.
Where possible, we highly recommend viewing the property and exploring the surrounding area to help with your decision. And those who have a builder, engineer or architect in their phonebook – ask them to view the property with you! A well practised eye may notice structural issues before you commit to paying for a survey.
On top of viewing and researching the property and area, we also encourage you to review the legal packs before you decide to bid on the lot. These legal packs can be obtained from the auctioneers and include documents including:
- Title deeds
- Local authority searches
- Environmental searches
- Fixtures and fittings list
- Sellers information form
- Leasehold information
Consider an offer before or after auction
To avoid the heat of the moment bidding and letting emotions get involved during the bid-off, offering a purchase price before the property goes to the room is an option – even when you’re told the seller isn’t open to offers.
There have been instances where sellers have been offered a price in advance of the auction and accepted the offer price. This means you may get the property even cheaper and avoid the high-energy involvement of the auction.
And for lots that were unsuccessful in the auction room, you can still offer a price! Your success will depend on the seller’s decision on your offer.