Many buy to let investors look for property bargains through the auction room. But if you are new to purchasing property through this route then take care to do your research; for example speak with the auction house, your solicitor, and your financiers. Here are some tips but always make sure you are well prepared before you give the auctioneer the nod.
Don’t get caught out when the hammer strikes.
- Do your Sums. Work out exactly how much you want to spend and what rental return you want to achieve. Be realistic, take into account property location, facilities and the type of tenant you want to attract.
- Get your finances in place. Usually once a lot has been sold you will have 28 days in which to complete the purchase – this can vary and can be as little as 14 days. You will need to secure the sale with a deposit on the day, usually 10%. Check with the auction house to find out what their procedures are. If you are arranging a mortgage or a loan speak with your provider and secure finance before you purchase.
- Know before you go. If you’ve ever been to an antique auction then you’re already familiar with how an auction functions, the format and bidding process. However, don’t be complacent; take a trip to a property auction as they can be very different. This way you can observe bidders tactics, how a property auction works, any extra costs or fees. Look at the catalogue and see what prices properties are selling for as this will give you an idea of what you can expect to have to bid. Check out the terms and conditions of the sale and the rules of the auction house. If you are unsure of anything or have any questions then speak to the auctioneer prior to the auction date. Read through all legal documentation clearly and speak with your solicitor if you need to.
- Do your homework. Find out what properties are to be auctioned and make a visit to see what condition they are in. Often properties that being auctioned are in a poor state of repair so this can give you an idea of what you might expect to pay on repairs and refurbishments. Find out if there are any planning or building restrictions, is it listed for instance, or is it is a flood or subsidence area as this might affect property insurance. If you are taking out a loan or a mortgage the lender may require a surveyors report. Take the property details to your solicitors for any legal advice or requirements you might need before you purchase the property. The auctioneer will also be able to advise you if there are any changes or addendums made to the sale conditions that could affect your financial arrangements, they may even be able to advise you if the property is sold before the auction takes place.
- Know your limits. Don’t get caught up in the furore of a bidding war. It can be all too easy to have your eye on a property but lose sight of its real value. Set a maximum value you are prepared to spend, having taking into account all additional costs including sale fees, and stick to it.
- Know the jargon. Arrive in good time as any important announcements or changes are usually made prior to the start of the auction and these may have a bearing on whether you wish to bid. If you don’t understand what being said then you could easily get caught out. For instance, a guide price is not the same as a reserve price. The reserve price is the minimum amount a seller is willing to sell for, whereas the guide price gives an indication of what to expect on the sale price of the property. The final sale price will depend on the reserve price being met and the bidding taking place in the auction room on the day.
- Can’t get there! Don’t worry if you can’t make an auction in person, you can often bid by proxy. This simply means that you authorise the auctioneer to bid on your behalf by providing them with written instructions to the maximum amount you are willing to spend, plus a deposit prior to the auction. Check with the auction house as many have their own proxy bidding formats. You may find that they allow bidding online or over the phone.
- Sold! To you! What now, you’ve done your sums, you’ve out bid the competition and now you have yourself a property. In order to walk away with your property, well maybe just the keys, you will need to pay your deposit so make sure you have your bank details and your cheque book. You may also need details of your solicitor plus some form of ID, for instance your passport, a photo driving license or proof of residency. Speak to the auctioneer beforehand about what you will need to bring. Don’t forget that the instance the hammer comes down on your bid you are bound by the terms and conditions of the sale and your legal liability for the property takes
Don't forget to insure your buy to let investment!
If you are thinking of buying a property for rental purposes do not forget to obtain buy to let insurance to protect your investment
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