What You Need to Know Before Going to a Property Auction | Auctions are no longer reserved for investors out to purchase property for the purpose of reselling it for a profit. In recent years, more and more people are using property auctions as a method of finding homes to buy and live in.
The main lure of property auctions is the price. Auction property is generally a bargain compared to those purchased through a selling agent. The bidding system is transparent, as you'll know for sure the amount that other bidders are offering. Furthermore, the auctioned property can be yours immediately - usually about 28 days after the sale.
To locate properties up for auction, locate the auctioneers in your area and sign up to be on their mailing list. Auctioneers usually send catalogues or online information regarding the properties for sale in your area. A good catalogue contains the basic information such as the floor plan, the guide price and a photo of the property.
Since the prices of auction properties are often well below market value, it is easy to get all excited and want to buy it right away. However, hold your horses and first get a survey conducted. A surveyor will conduct a home buyer's report which will assess and point out potential problems you may have on the property. If the property seems like it needs some major work done, then get an estimate from your local builder, electrician or plumber. Dirt cheap properties often have the caveat of entailing expensive repairs. Factor in the cost of renovation to the price you are willing to bid. Though most auctioneers will provide a seller's pack which contains a survey, valuation and other information on the property, you might still want to get your own surveyor - just to be on the safe side.
Before going to an auction, make sure you have enough cash for the property's requirements. This is important because a sale becomes legally binding immediately. Once a bid is won, the buyer will usually need to make a 10% deposit immediately and pay the remaining balance 28 days after the day of the sale. Therefore, do not go to an auction to bid if you do not have cash ready or if you do not have a firm mortgage arrangement. For this reason, first-time home buyers should think twice about purchasing at an auction considering that most of these properties will require extensive renovation work and a large upfront cash investment.
As they always say in property investment, fall in love with the deal and not with the property. Take account of all costs and expenses involved in deciding on your maximum bid such as solicitor's fees, arrangement fees to the mortgage broker, valuation and survey fees, building insurance, moving costs and the expenses incurred in selling your previous home or property. Remember that the reason for purchasing a property at an auction is to get a bargain, and not to spend more than necessary. Thus, factor in the other considerations such as the amount of deposit you can afford, the true market value of the property and the cost of repairs and improvements.
With these tips in mind, you are all set to embark on your first auction and come out of it with a bargain.
By:Parmdeep Vadesha
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