The property market in the UK has been difficult to predict in recent years, as rampant growth stimulated by 2021’s stamp duty relief continued on into 2022 – raising property values by 9.3% in one year. The unfortunate result has been the pricing-out of many from the housing market entirely.
But for first-time buyers struggling to marry their budget with market values, there is another option: auctions. Property auctions are a unique but effective way to find good prices for houses – but they require a shrewd approach to navigate properly. Here are some things you should know before you buy a house at auction.
Auctions can make for excellent viewing, but participating in one requires much more preparation than might initially be thought – and this is especially true when it comes to investing in property at auction. Comprehensive research into a property is recommended before you commit money to it in the form of a bid.
One important form this preliminary research can take is through physical examination of the property. Rather than treating the property’s condition and upkeep as an unknown quantity, you can contact the auction house responsible for the sale and request a property viewing. This gives you the opportunity to examine its condition, identify any potential issues and make a more informed decision on whether or not to bid.
Auction particulars, and legal advice
With regards to a conventional property acquisition on the housing market, professional conveyancers are used to manage the legal aspects of the property’s sale, from property searches and examination of legal documents to administration of funds.
In the case of an auction, the conveyancing process cannot occur as usual – but conveyancing solicitors can still be a necessary resource when it comes to buying a property at auction. Indeed, retaining the services of a conveyancer before the day of auction can help you avoid key pitfalls; while specific information and property searches may be unavailable to you, conveyancers can still examine available information and produce a pre-auction report, based on legal information provided by the auctioneer.
Setting a budget
Auctions can be a thrilling experience, especially if you have your heart set on producing a winning bid for a specific lot. However, the thrill can easily give way to carelessness, and result in you spending more money than you may have reckoned with.
Solidifying your budget is of crucial importance to the success of your day at auction; exercising restraint can ensure you do not overstep your financial bounds, and ultimately obtain the deal you’re looking for. The final bang of the gavel is the point at which your bid becomes legally binding – and if you cannot afford the full list price by the end of agreed terms, you will lose the property and your deposit.
Guide price vs reserve price
Lastly, there is a crucial distinction to understand before you bid. Each property will have a guide price, referring to the price at which bidding starts. But many will also have a hidden reserve price, which represents the lowest property valuation amount at which the seller will sell. As such, there is a chance your guide-price bid will not result in a successful purchase. Reserve prices are often around 10% higher than guide prices – something it can be handy to bear in mind as you budget.