Buying a home at auction can be an exciting and profitable exercise. Sometimes, you can get a real bargain and avoid the lengthy, drawn out processes of traditional home buying, especially if you’re happy to do some renovation work. But it’s not all fun and games: there are some risks involved.
The first thing to say about buying a home at auction is, unless you’re willing to take extreme amounts of risk, the build-up to the auction must be very much the same as the build up to placing an offer on a home in the more traditional way. It’s all in the planning.
Research and Planning
First, you need to research the various auction houses, choosing which to attend. There are, of course, online auction sites you can choose, in which case the bidding process will be digital.
When you’re searching for homes on the big property portals, those which are going to auction will include details of where and when it’s happening.
Once you’ve identified the auction house, you’d be smart to get the auction catalogue for the day your desired home is being presented – there might be some more homes you like the look of going under the hammer on the same day. Auction homes will usually be advertised online and in catalogues for about a month before being presented for purchase.
Once you’ve identified the home, or homes, you’re interested in, the next stage is research and due diligence exactly as it is when buying traditionally.
First, get your finances in-line. Whether it’s securing a mortgage offer or pulling money together for a cash purchase, you need to know exactly how high you can afford to bid on the day.
Go and view the house (the auction house will help facilitate this), more than once if needed, and commission a full survey. All of this helps you work out how much money you’re going to need on top of the auction price to fix-up the property to your desired standards.
It’s important to note that the price stated in the auction catalogue is known as the ‘guide price’ – you shouldn’t base your sums on this because homes can often sell for more than 10% over the guide price.
Once at the auction, you’ve got to keep your cool. Once the auction is under way, you can’t afford to get carried away if someone starts battling you for your dream home. You have arrived with a maximum budget in mind and should not bid any more no matter what happens.
This is the risk of auctions, you might get outbid. The worst thing to do when this happens is up your offer to a figure you cannot actually afford because the second that gavel goes down, you are legally bound to the purchase.
If all goes well, however, the gavel will fall and you will be the proud owner of your dream home. All that’s left is to hand over a 10% deposit and the keys are yours.
If you have any questions about buying at auction, our property expert, Russell Quirk, is happy to help. Drop us a note in the comments section below.