It takes 28 days to buy a property at an auction. This is what makes auctions so much lucrative. The seller and the buyer can have the keys exchanged within this time period, making auctions one of the quickest ways for property investment UK.
Property investment UK can be done through a number of ways, and buying a property at an auction is one of the most attractive options for investors to explore.
However, it is crucial to get things right. While the right choice can be a boon, it may prove to be expensive in case of a wrong decision. Auctions can play a vital role for property investment UK but only if implemented through an informed process.
What properties can be bought at auction?
Every kind of property, from conversion opportunities to houses and pieces of land, can exchange hands at auctions. These may include garages, water towers, former public lavatories and alleyways, along with houses, flats and offices. Some believe that the properties sold under the hammer must have something wrong with them, but this need not be the case as a house or land may come onto the market for a variety of reasons. The property may be hard to value or the owner may be in a hurry and wants a quick sale. Therefore, it is not necessary that a property for auction should have problems.
Why buy at an auction?
Buying at auction has a number of advantages compared with the other types of property transactions. While the traditional process may take months to complete, buying via an auction is much quicker and involves certainty. On the contrary, a conventional purchase may take a long time to complete and even then the deal may not finalise. Potential deals may fall off at the eleventh hour, resulting in a loss of time, efforts and finances.
The house buying process can be long and arduous, with lots of opportunities for things to go wrong such as the risk of being gazumped, delayed sale if the current owner’s purchase falls through etc. Gazumping happens when a buyer has had an offer to purchase a property accepted by the seller, but before the sale is completed the seller accepts a better offer from another buyer, pushing the first buyer out of the purchase. In the worst cases, gazumping can leave the would-be buyer out of pocket by thousands of pounds in terms of non-refundable survey costs, conveyancing fees and mortgage arrangement fees.
Any house buying deal under the conventional process is not infallible till the contracts are exchanged. The successful bidder knows that the purchase price is only just above the next person’s highest bid. This is also transparent as there is no possibility of estate agents hiding from the buyer.
Advantages of buying a property at an auction
It can be done in a day
Buying a property at an auction may be done in a day. Though, a successful bid at an auction involves a lot of preparation before the auction itself, it comes down to the day of auction. It only takes a day to make or break the deal. Either it is a successful bid and the buyer purchases the property outright at the auction or the buyer is pushed out of the purchase. In the case of a successful bid, a formal contract is given to the bidder and the deposit is made on the same day. This eliminates any chance of counter offers, gazumping and other long-drawn processes, and only purchase process is required to be completed.
Transparency of the auction process makes it viable. Offers are made and accepted inside the auction room. The selling/buying process unfolds at auction itself and buyers know the offers as and when they happen. The auction house publishes the catalogue which includes legal packs for every property up for auction which can be viewed and downloaded.
No cash is not a problem
Buying at the auction is not exclusively for cash buyers. If a mortgage is needed, potential buyers can get a mortgage in principle before the auction so that it is ready at the time of buying. Bridging loans are another option which provide short-term funding option.
Many believe that putting properties on auction is a fair and open way of determining market value. Buyers can also purchase somewhat unusual properties such as those which have not been on the market for a significant period of time.
Auctions offer an equal opportunity to all the parties. An auction is an open and fair process in which parties participate in a transparent way.
Depending on the day, the potential buyer may find a good deal. There may be less bids for the property on a particular day or there may be less demand for a particular type of property the buyer plans to buy.
Auctions offer more choices for properties compared with anywhere else. Properties at auctions include unusual or derelict properties which are not found with estate agencies. Properties for auctions include a unique mix of properties and include repossessions or properties in need of renovation or modernisation. It is a unique opportunity for developers as well as individual buyers to buy such a property at relatively cheaper prices and then let it out or resell after renovation.
Developers and investors
Auctions are particularly a great option for developers and investors as it provides them the opportunity to redevelop the property for the purpose of reselling or renting. Property investors can build portfolios by buying large volumes of properties at low costs. For the owners’ of derelict properties, auctions are an attractive way of selling off their properties as sales are achieved and pricing is competitive as well.
Bid from home
Bidding can be done from home as there are a number of ways to bid if the bidder is not inclined to visit the auction room. Bids can be dome via phones, online or by somebody on the bidder’s behalf.
Potential buyers should go to the auction prepared with the deposit as most auctions require a 10 per cent deposit on the day. The balance is required to be paid within 14 days to six weeks to complete the purchase.