Buying a house at a property auction certainly has its pros and cons. You have to make quick decisions during which you spend a lot of money in a short amount of time, surrounded by multiple other bidders making the process rather competitive. You need to do your due research before you start bidding at a property auction! And of course, you need to have your finances in order and set a definitive budget in your head because it is very easy to get caught up in the heat of the moment! If you are thinking of buying a house at a property auction in London, or anywhere in the UK, here are 5 important factors that you need to keep in mind.
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1 There is no backing out
As a buyer, if you make the winning bid, there is no backing out of the deal. Once the hammer comes down, and the auction is over, the buyer who has made the winning bid is required to complete the formalities and put down the deposit. Unlike a traditional house viewing process, where you can view a property multiple times before making a decision, be it after weeks or months, you need to make decisions in a matter of minutes during an auction. Of course, you have ample opportunities to view the property beforehand, but at the time of the auction, you cannot back out from a winning bid because you happened to change your mind.
2 Always read the fine print
All the details for the same will be mentioned in the terms and conditions of the auction, so be sure to read the rules and regulations as well as the fine print. Details such as the deposit amount that needs to be paid, the fees of the auction company as well as any other upfront payments will be mentioned in the small print. If you do not read the fine print, you might end up paying some expected costs with tight deadlines. Before you start bidding at an auction, always read the terms and conditions carefully so that you know exactly what you are getting into and what payments need to be made by when, to avoid any financial issues in the future.
3 Research, research, research
Before you consider buying a property at an auction, you need to do your due research. Once you have found a property that you like, find out the value of the property. You can hire an estate agent or a solicitor who can help you determine the approximate value of the property. This will help you decide how much you want to pay for the property along with how much your maximum bid should be capped at. Also, it is a good idea to hire a property inspector who can check the property thoroughly to make sure that everything is in order. You could also research the market trends and figure out how much similar properties in the area have sold in the past, as this will help you determine the right bidding price.
4 Paying with cash vs buying with financing
If you’re buying a property with cash, then you need to have the funds ready and available. For instance, if you have closed the deal today, then you have a certain number of days to pay the seller the full amount – all the details will be mentioned in the terms and conditions of the auction house. However, if your money is in a savings account, it might take you 4 or 6 weeks to just get the funds released, which might be a little too late. On the other hand, if you are buying a property with a bridging loan or a type of auction finance, you need to have all your paperwork in order before the auction even starts. Once you have placed the winning bid, you will not have too much time to gather the lender’s cheques or secure a bridging loan!
5 Set a budget and stick to it
Before buying a property at an auction; you need to have two prices in mind. The first price should be the ideal price, which is essentially how much the property is worth. The second price should be your upper limit, which is the maximum amount of money that you are willing to spend on the property. To determine these two price points, you need to have a budget in mind. Once you have an upper limit, you need to make sure that you do not cross that amount during the bidding process, no matter how much you love the property.