Buying at Auction

The cost of housing continues to rise about twice as fast as the percentage increase in salaries. As a consequence, more people are finding it difficult to afford a suitable property in the area of their choice.

It is a fact that an increasing number of people in the UK are unable to afford to buy their own property until they are in their middle thirties, and even then they often have to compromise on their choice. One of the few remaining chances of obtaining the sort of property that may suit an individual's requirements is by purchasing a property at auction.

Buying a home in this way is becoming an increasingly popular method of acquiring a desirable house at something approaching a bargain price. This is particularly the case if the prospective purchaser is a reasonably competent at property maintenance as many properties sold at auction are often dilapidated and in need of remedial work. This can mean that they are sold a price that is affordable. So if you think that buying a property at auction may be an option look at some of the points to consider before you make your bid.
Decide on your maximum budget. You may have a deposit put by for home purchase already. Go to a selection of mortgage lenders and explain your intention to buy by auction.

Most lenders these days are used to this type of request and will provide you with details of what they will be prepared to advance on a suitable property and what the repayments are likely to be. This is known as ‘an agreement in principle.' On top of the price that you pay for your property and the potential repairs, there will be ‘extras' including legal fees for the conveyancing and stamp duty. Make a careful note of the total expected expenditure and let that sum be your bidding guide.
Locate the property or properties that interest you. You can search for properties on line, or leave your details with estate agents who will notify you of forthcoming auctions in your selected area. While you are searching, visit some property auctions to discover the routine. Make a note of what properties are sold and for how much. This will act as a sort of price guide for the future.

When you find a suitable property, make arrangements to view it. Ask the selling agent for an information pack and if necessary, arrange for a structural survey to discover if there are any major problems. You may be capable of doing a whole range of home repair jobs, but if the home you are about to bid for is riddled with rot and needs a new roof, it may be too expensive to consider.

When you attend the auction, remember that you have your maximum price and don't get carried away by the atmosphere. The property will probably have a reserve price and will not be sold for anything less than that sum. If your bid is the highest above the reserve, the vendor is legally obliged to sell it to you. You will then be required to pay a deposit of 10 per cent of the purchase price immediately. Generally you must complete your purchase within an agreed timescale that is normally set at 28 days. This of course means that you will need the funds readily available from the lender. You will be then required to sign what is known as a memorandum of sale and serve it on the seller. You will receive a similar document in return and the house becomes your property.
The process may sound daunting, but many transactions of this type occur on a daily basis. Do get expert legal advice and if you follow the rules there is nothing to fear.