With first time buyers looking for ways to get their foot on the property ladder, more of them are turning to property auctions. However, success in this volatile field can be difficult with sellers looking for a great price and buyers looking to snag a bargain. It’s a complicated game of cat and mouse; to be successful, both sides will need to adopt the right strategies.
Property auctions used to be places for the professionals but that is now changing. The lure is not hard to see. There’s no chance of being gazumped – once the auction is over that’s the end of the story. Add to that the simplicity of cutting out estate agents, savings on fees, and potentially picking up some real bargains, and auctions represent an excellent option.
Auctions also make sense for many sellers. They are a quick route to market if you’re looking for a quick sale, or for those houses with potential but which need a lot of work. These might have a difficult time in the conventional market, but at auction they are hidden gems for first-time buyers willing to take on a renovation project.
However, there can be pitfalls for both sides. Sellers may not necessarily get the price they’re looking for while buyers will be worried about taking on a house which has too many issues. Success for both sides depends on how they approach it.
Buyers should ask a few questions to decide whether auction is the right option for their property. Properties which are unique and eccentric may find a market here where people will be willing to pay what they feel it’s worth. If you once fell in love with the property, there’s a good chance that others will feel the same way at auction.
Auction will also be useful if you are looking for a quick easy sale. Once the hammer comes down you have a legal obligation to pay. You’ll have to come up with 10% of the price there and then and will have 28 days to come up with the remaining balance. It removes a whole lot of delay and uncertainty but is fast paced for someone new to the house buying process. Learn about different auction finance options here.
Buyers should do as much due diligence as possible. Visit the property and try to get an idea of any problems such as dry rot and structural damage. Find out whether there are any legal issues with land use or problems with the neighbourhood.
A lawyer may also come in handy. Once you express an interest in a property there will be a lot of legal literature to read. Make sure you go through this thoroughly. There may be all sorts of legal covenants and obligations involved which can impact the value.
When it comes to the property auction itself, the maxim is to be prepared. Research what properties are available at the auction and get an idea of what their market value might be. Decide which ones you’re interested in and find out everything you can about them. Prepare your finances. Once you agree to buy you’ve entered into a legally binding obligation. You’ll need to know that you have the funds available. You can read our full guide on preparing for auction here.
Last but not least, don’t get carried away. Property auctions can be exciting. The blood will be pumping and it’s easy to get carried away with the whole experience. But this isn’t a second-hand coat on Ebay, this is your first home. Make sure you have a maximum price in mind and don’t go over it. Make a plan and stick to it - worst case scenario you can see what the following month’s auctions have for sale.
Property auctions offer benefits for all sides, which is why both buyers and sellers are turning to this option in increasing numbers. For both, the secret is to do your homework and approach it in the right way.
If you’re thinking about buying your first home at auction you can browse our upcoming auction diary. Or search directly for properties currently available.