The process of buying a house at auction may seem simple, as portrayed in TV shows like “Homes Under the Hammer.” However, it is not as straightforward as it may seem. You attend the auction, place your bid, and hope to become the new owner of the property. These shows often highlight the post-auction stage of renovating the property for selling or renting. They tend not to look at the pre-auction steps you need to take.
Although the procedure may seem quite uncomplicated, it is crucial to follow certain steps to safeguard yourself. It is important to ensure that you do not accidentally buy a subpar property instead of the desired bargain.
Advantages and Disadvantages of Buying a House at Auction
The main reason individuals tend to buy property through auctions is the belief that it is a cost-effective option. Typically, auctioned properties are priced lower than those sold through traditional methods on the open market. In contrast to the traditional method of blind bidding on a closing date, where bidders are unaware of other offers, auctions provide complete transparency in the bidding process. The auctioneer openly declares the current highest bid and actively encourages others to make higher offers.
For those looking for a quick purchase, buying a house at auction purchase may be a suitable option. Typically, the purchase of the auctioned property must be finalised within 28 days. However, a deposit and an auction fee will also need to be paid upfront.
Every home purchase has its advantages and disadvantages. Despite the common perception that buying a property at an auction guarantees a good deal, there are underlying risks that must be carefully considered and addressed.
Pre-Auction Preparation
You need to make careful preparation for the auction day to avoid unexpected setbacks and potential losses.
Things to Discover
Once you have discovered a suitable property in the auction listing, it is important to physically visit and inspect it. Relying solely on the information provided in the catalogue or the statements made by the auctioneer is not advisable. Purchasing a property at auction carries a high level of risk and it is crucial for buyers to be cautious and well-informed.
Check out the state of the property before making a purchase. Keep in mind that auction properties may not come with a Home Report or Energy Performance Certificate, so it is crucial to conduct a survey prior to the auction. It is wise to find out about any structural or other condition concerns before the auction. Doing this will help you more accurately work out your budget to cater for any repairs or improvements.
Be sure to sign up with the auction house. They will provide you with early notifications for the auction. Sometimes, a property may be removed from the auction if someone makes an acceptable offer to the auctioneer. This can be very annoying, particularly if you have already put in effort and resources to research the property.
Make sure you check the title when buying a house at auction
When purchasing an auction property, some buyers might neglect the importance of checking the title. However, it is crucial to thoroughly examine the title to. This is essential to avoid any potential issues with the title that may arise after the purchase. It is necessary to find out if there are any complications with the title, such as boundary disputes or rights granted to others. If there are, they may hinder your plans for the property.
If you plan to sell the property after renovation, it is important to consider any notices that may affect the property and take care of them accordingly.
To ensure an accurate valuation, compare the property’s value with comparable properties in the area. While it may seem like a good deal, researching the prices of neighbouring properties will help in planning for the purchase. ScotLIS, managed by the Registers of Scotland, is a useful resource for checking property prices. You can also obtain a copy of the property title for only £3.00 (plus VAT) if the property is Land Registered.
Make sure all your finance is secured
The process of settling an auction property is typically fast, usually taking only twenty-eight days from the auction date. However, there are other financial considerations to keep in mind. On the day of the auction, if you are the winning bidder, you must pay a deposit that is non-refundable. This deposit is typically 10% of the final price and will be forfeited if you do not complete the purchase. Additionally, you will also be responsible for paying the auction house’s administration fee. This is usually 1% of the price (plus VAT) and there may be a minimum charge.
Before undertaking any renovations or enhancements to the property, it is crucial to thoroughly research and understand the overall costs involved. This is especially important if your plan is to remodel the house and put it up for sale. You wouldn’t want to face financial constraints during the renovation process.
During the Auction Event
When attending an auction, it is important to have a well-defined plan and budget. As the bidding begins, you will be able to determine the level of interest in the property. This will help you to decide when to take part in the bidding process. Additionally, you should also have a clear understanding of your financial limits and withdraw if the bids surpass the maximum amount you can afford. It is crucial to remain mindful of your budget and not get caught up in the excitement of the auction.
Once you achieve success, you will need to sign the “articles of roup”. These serve as the agreement for the sale and purchase of the property and outline the terms of your purchase. In addition, you will need to pay the deposit and the administration fee to the auctioneer.
It is important to inform your solicitor about your success so they can carry out the conveyancing for you.
Other choices
You can offer at any time for a property that has been listed for auction. If the price you offer is acceptable, the auction house can withdraw the property from the auction. They can do this right up to the auction day.
If you do make a successful offer before the auction date, the timelines and terms will still apply in the same way as if you had been the successful bidder.
What are the first steps before buying a house at auction?
When you are thinking about buying a property at auction, it is important to inform your solicitor in advance. They will provide you with guidance and inform you of necessary actions and timing. In addition, they will help with pre-auction title enquiries and offer advice on any potential legal obstacles that may arise.
To get updates on auctions in your desired areas, sign up with the auction houses that are advertising in those locations. They will then provide you with the catalogue for the upcoming auction.
Experts in Property in Rutherglen, Glasgow and throughout Scotland
Carr Berman Crichton are dedicated to helping clients with all aspects related to house sale and purchase. Our expertise includes handling both residential and commercial conveyancing, making us the ideal choice for managing your property requirements. This encompasses everything from standard sale and purchase transactions to buying property through auctions.
If you are thinking about buying or selling a house or about buying a house at auction, please contact us.
If you like this, you may also be interested in these articles:
Navigating Your First Home Purchase in Scotland: A Comprehensive Guide for First-Time Home Buyers
Can I pull out of buying a house if my offer has been accepted?
Missives are concluded – does this mean I’ve actually sold my house?
