Buying at Auction
With the average home buyer being 34 years old and the average house costing more than 4.7 times the average wage, it’s no wonder that more and more people are looking at creative ways in which to secure a home of their own. The possibility of buying a property at auction has received a lot of interest since television programmes offered us a bird’s eye view of the auction process. Since the cost of the average home has increased by over 50% whilst our salaries have risen by under 23% the first time buyer faces a particularly difficult up hill struggle to get onto the property ladder.
There are of course, many reasons why you must be careful when considering an auction purchase and most of them will have crossed your mind. Firstly the condition of the property will be one of the main considerations as will the location. If you are very good at DIY then it makes it easier firstly to spot problems and then to be able to rectify them. Some properties will have only minor problems and require some modernisation and decorating. If on the other hand you come across dry rot you have very little chance of getting away with doing the minimum. It is always best to have a full survey carried out if you are in any doubt.
Firstly you need to source your property. Surfing the net will keep you up to speed on local auction houses that deal in residential properties. Request a catalogue and visit the next auction with a view to familiarising yourself with the atmosphere and routine. Copy down the price achieved to give you an idea of what the properties went for.
If you do see a property of interest, find out the viewing arrangements. Auction houses will often provide a legal pack which contains the legal documents outlining special conditions of sale and title deed details. You will, by this time, have worked out how much you can afford to spend on the property and the renovations as well as all the legal costs and stamp duty. If you write this figure on a piece of paper and take it with you to the auction, you should refer to it every time you bid. This will act as your reminder that anything spent above that figure is NOT AFFORDABLE. It is very easy to get carried away, figures become a blur and the ‘must have’ devil takes over. The property will normally have a reserve price and if you meet that price and become the highest bidder, the Vendor is legally bound to sell it to you. Once you have bid and the auctioneer has accepted it, the property is yours and you will be expected to put a 10% deposit down immediately. You will then be expected to complete within 28 days – so the mortgage offer must have been made with the lenders aware that you are buying at auction.
Having filled out the purchasers slip with your details and that of your solicitor, you will need to sign the Memorandum of Sale, this will be exchanged with the Vendors part as soon as it is ready, this is the part that forms the Contract of sale.
Usually a property will have a reserve, if you meet it the Vendor is legally bound to sell to you. If your bid is the highest and the reserve has been met you are the winner. Now you will need to fill in a purchasers slip requiring details such as your, name, address, contact information and that of your solicitor. Next comes the signing of the Memorandum of Sale, which you will exchange for the Vendors part as soon as it's ready - this is your contract and should be sent straight to your solicitor. You will also be asked for proof of ID and your 10% deposit, the balance will then need to be paid in 28 days of the auction date.
