Buying a new home at an auction can be an exciting and thrilling way to purchase your next property. Whether you are buying your next home or a property to develop, buying at auction can be a great way to bag yourself a bargain home. Using property auctions isn’t always easy, and you will come up against some seasoned property buyers with a lot of experience in buying at auction.
In order to win the bid and get the best price for your dream property, there are a few things you need to do. Buying at auction can make the property buying process much faster, and save you a few thousands of pounds, but it is not without its risks. If you aren’t fully prepared when you head to the auction house, you could leave disappointed or end up paying over the odds. Follow our guide on how to buy property cheaply at auction to make your next auction experience a great one.
Check up on the property beforehand
About four weeks before the auction takes place, the auctioneer should publish a catalogue with details of all the homes that will be up for sale. Read through carefully to choose a property that suits your needs. Your requirements will be different depending on what you are planning to do with the property, for example, if you are looking for a new home to live in, you might want something that doesn’t need too much work.
If you are after a property to develop, you might be happy to buy somewhere that is run down so you can do it up however you please.
Once you have chosen a property, or properties, of interest to you in the catalogue, do a bit of research to determine if they are really worth your time and money. Arrange a viewing to see the properties in person and bring a surveyor along with you to get an accurate valuation done. Research the local area thoroughly and see how much other similar properties in the area have sold for recently to get a rough idea of the market value.
It can be worth visiting a property more than once to get a real understanding of the place, take your own photos while you are there, and find out why the property is up for sale at auction.
Have your finances in place
The last thing you want is to get to the auction, win the bid on a property and then find yourself in a situation where you need to get a mortgage approved in less than a month. Most auctions require you to pay a 10% deposit upfront on the day, so be sure to have this readily available when you attend the auction.
You will then be given around 28 days to pay the rest of the balance for the property, either outright or by some form of finance. If you are using bridging finance then get an offer arranged in principle beforehand, so everything is ready to go when the gable hits.
If you want to use a mortgage to buy the property, you need to make sure the property will be accepted for a mortgage. Most mortgage lenders will require the home to have at least a working kitchen and bathroom in order to lend on it, so if you are buying a property that needs renovating then make sure you know these details beforehand.
Speak to your mortgage lender before the auction and arrange a mortgage in principle, as it can be a very difficult task applying for a mortgage and getting approved in less than 28 days.
Discuss your purchase with a mortgage broker or finance specialist if there is anything you are unsure about. A good broker can help you to decide on a reasonable price for the property and help you get the best deal on bridge finance or a mortgage.
Have a plan and stay calm
Auctions are exciting; it is easy to end up bidding more than you had planned, or more than you can reasonably afford, just because you get caught up in the moment. Study the catalogue before you arrive and note down your absolute maximum bid for each property. Take these maximums with you and make sure you stick to them on the day, if you feel you might struggle, bring someone else along for support and tell them not to let you get carried away!
At most auctions, the first few properties will go way over the guide price as buyers start off enthusiastic and bid high to ensure they leave with something. Avoid these first few properties to avoid paying over the odds.