LETTING & ESTATE AGENT

Top tips for buying a property at auction

Top tips for buying a property at auction
Admit it... you've all watched Homes Under the Hammer, haven't you?

Even if it's when the kids are sick and off school, meaning taking that extra day out of the office, we've all had a little peak, even after Martin Roberts's antics in the I'm a Celeb jungle.

The concept of the show, for those steadfastly refusing to get on the Hammer Bus, sees investors buying properties at auction, renovating them and then either letting or selling them on, hopefully for a profit.

And the BBC programme is right in its mantra that auctions can be one of the best places to buy property with the best chance of a margin. But beware, they can also be a nightmare, particularly if you don't prepare before attending.

Property auctions go with 'bargains' like cheese on toast and the added bonus? No chains, with buyer and vendor immediately signing legal contracts as soon as the hammer drops.

But if you don't do your homework, like reading legal packs, you can come unstuck. Here are Martin & Co's top tips for buying a house for sale at auction.

Due diligence

Do your research before entering the auction house. House auctions are exciting and it's easy to get carried away before the penny drops later that you've ended up with a property that is going to cost more than you thought to sort out. Read the legal packs before raising your hand and getting involved in a bidding war and sort your finances out before the day of the property auction.

Money

You'll need a 10% deposit on the day of the auction and will need to find the rest of the purchase cash within 28 days, so be prepared.

Mortgages

Speak to your lender before the auction and get an agreement in principle. High street banks and building societies often cannot turn around the finance within 28 days so failure to prepare could cost you your deposit.

Temporary loans

The 28-day turnaround period often catches buyers out and many are now looking at temporary loans to cover the short-term finance commitment before obtaining a more attractive deal from a mortgage lender later.

Beware: Short-term loans will end up costing you more in the long run, but the confidence short-term finance hands buyers in the auction room will often mean a better chance of obtaining the property you want.

Red tape

Get your documents in order when looking to obtain a short-term loan or mortgage. You'll need a passport or driving licence, proof of address and proof of income. Start digging these documents out well in advance of attending an auction so you're not behind the eight ball from minute one.

Know your limits

As we said above, the drama and excitement of the auction room can often see buyers over-stretching themselves in a bid to see the hammer fall in their favour. Set a maximum bid for each property you are looking at in your mind before entering the room. If you pay too much, you're in danger of creating a chasm between your mortgage lender's valuation and the price you end up paying, meaning covering the difference from your own pocket or another loan. A costly affair indeed, so always stick to your budget and don't get carried away.


If you are looking to bag a property bargain, check out our auction site or speak to your local office about how to find a property auction near you.