Buying a Property at Auction
If you have ever watched the TV show, “Homes Under the Hammer”, then you have a pretty good idea of how properties are sold at an auction.
You also are probably aware of the bargains to be had, and also some of the pitfalls that you need to be aware of.
Buying anything at an auction, be it a property, furniture, antiques, a collectable item, anything, can either be a bargain to be had, or you wind up bidding too high, or the item has issues, such as in need of repairs.
There are bargains to be had at auctions, but the first thing you need to know and do is your homework, research.
You need to research what it is you are looking to by, in this instance a property.
Before the Auction Research
Many auction houses release packets and details of the properties they are planning to auction off. These details outline the property, location, if there is a reserve (an amount the seller must receive), and other details about the auction itself.
Buying a property is for the majority of us, the single largest purchase we will make, and there are a few things to be aware of and look out for when buying a property. And as we will see, buying a property at auction in itself adds a few additional things to look out for.
If possible, it is always best to try and physically go see the property or properties you are interested in bidding on.
There is no way a photo and packet of information can convey what you can see and feel by actually going to see the property in question.
Things like what is the neighbourhood like, is the property really as close or as far away from pubic transport as stated. You may find the property sits just next to a busy rail line and trains go noisily by at all hours.
When buying something at an auction, the bidding usually starts either with the seller’s reserve, or the auctioneer will start at a price near the reserve.
As people bid, including yourself, it is easy to et caught up in the heat of the moment, and possibly overbid; paying more than you had anticipated to pay.
One way to not have this happen, and with auction purchases you need to have this in place prior to bidding, is to have your financing in place already, and knowing exactly how much you have to spend.
When you buy a property at an auction, if you are the successful bidder, you will be expected to pay 10% of the sale price on the day of the auction, and then the remaining balance within 28 days.
Now 28 days may seem like enough time to secure a mortgage, but not all mortgages get approved in that time frame, and in addition, a valuation will need to be done on the property.
Mortgages are granted based on affordability, a deposit (in most instances), and a valuation of the property.
You need to have financing in place prior to bidding, or at best a loan in principle, pending a valuation.
Why Buy a Property at Auction?
The obvious reason to buy a property at an auction is to bag a bargain!
Another reason to buy property at auctions is that you know when the gavel goes down and the auctioneer says sold to you, you bought it. You cannot be gazumped and loose out.
Auctions can be good for property investors, who like to buy a property, and then fix it up and quickly sell it on.
So a couple of points to remember if buying a property at an auction:
* Do your research on the property prior to the auction
* Know your budget
* Get your financing in advance of the auction
* Remember there can be some additional expenses with buying a property at auction, repairs, etc