Buying a Home at Auction: Key Questions and Considerations
08 September, 2021
With properties at auction often up for grabs for less than GBP30,000, picking up a home for way less than its true market value is perfectly possible, there are other issues to factor in prior to buying a home or any other type of property at an auction.
The home you buy will likely need some work
Properties purchased at auction for prices below their true market value often need moderate or major renovations in order to make them safe and habitable, hence the importance of ensuring the property has been fully surveyed and its renovation requirements factored in.
Always view the property before bidding
While it is perfectly possible to purchase auction properties without having viewed them in person, it is not the recommended approach. Particularly if looking to buy a home to live in, it is essential to personally check every inch of the property before bidding on it.
What kind of finances do you need in place?
If your bid on a property is successful, you will be expected to pay a 10% deposit immediately. After which, you will almost always be given a period of 28 days to pay the full outstanding balance on the property. You should therefore ensure you have been approved for the mortgage you need in advance, rather than applying later or use an alternative funding source such as a bridging loan.
What is a legal pack?
A legal pack is a set of forms and documents the solicitor of the seller prepares which contains things like title and land registry details, documents of previous sale completions and detailed information on fittings, fixtures and so on. It is made available by the seller around a week before the auction and can be accessed freely by anyone interested in bidding on the property.
Is it necessary to hire a solicitor?
Unless you have extensive experience in such matters, the answer is yes. You should hire a solicitor to take a detailed look through the legal pack on your behalf, in order to ensure everything is as it should be and that there are no discrepancies. A solicitor can also provide helpful impartial information on all aspects of the purchase process.
What is the difference between a reserve price and a guide price? The guide price for buying a property at auction is simply the suggested price the seller expects the property to sell for. Meanwhile, a reserve price is the minimum amount the seller is willing to accept for the property. If a reserve of GBP100,000 is set and nobody bids higher than say GBP80,000, the property does not sell without the express consent of the seller.
What kind of ID do I need to take with me?
You will need to take two forms of ID with you on the day of the auction, which will be used during the registration process to verify who you are and where you live.
What happens if my bid is successful?
If your bid is successful on the day, you will be expected to present your ID once again and pay the typical time percent deposit requirement. This is something that takes place at the legal desk in the auction house, where you will also sign the contract pack and agree to pay the rest of the outstanding balance within 28 days.
If you have any further questions regarding auction property purchases, please contact specialist finance broker UK Property Finance.
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