Buying a property at auction

Over the past year the housing market has entered some very choppy waters. House prices have been falling month on month for over a year, and many homeowners have seen their equity levels plummet. In addition to this the high cost of living has resulted in many homeowners being unable to keep on top of mortgage repayments, which in turn has led to an increase in repossessions.

Whilst falling house prices would traditionally come as good news for buyers, particularly first time buyers, the current climate has resulted in many people still being unable – or unwilling – to purchase property.

One of the reasons for this is that mortgage lending has been very restricted since the onset of the global credit crunch, which means that many people are unable to get the finance that they need to buy a property. Another reason is that many are unwilling to take the plunge and buy a property at a time when house prices are still falling.

However, there is one group that could potentially benefit from the fall in house prices, and in particular the huge discounts that are available on repossessed properties that are going under the hammer at auction. Investors who have some capital to invest in property can now enjoy some excellent deals on auction properties, with homes being sold at around 25 percent less than they were this time last year.

Those that do not have the ready cash to invest may still experience problems, as many lenders seem to be turning away investors looking for mortgages at the moment, but the cash rich could make a killing on property purchases at auction. However, if you are planning to invest in a property at auction you should bear in mind a few things that could help you to make the right choices.

If you are new to buying property at auction then don’t just jump in at the deep end – remember, this is likely to be a very important and long term investment so you need to get it right. Attend a few auctions just as a spectator to get a feel for how they work, and if you know someone that has already purchased property at auctions then all the better, as you can draw on their experience and expertise. Attending a few auctions will enable you to get an idea of how property auctions work and how the bidding process works, which could help to save you from making some very costly mistakes.

Once you are ready to start bidding for properties at auction make sure you have an idea of which properties you are interested in. Research the areas that the properties are in and check whether there are local amenities and facilities within easy reach. If you intend to rent the property out this could make all the difference to your success when it comes to getting tenants easily.

You need to think about what sort of group or person you will be renting the property out to as well in order to determine its suitability. For example, many people decide to rent out to students, and if this is your plan you should ensure that the property you are purchasing is close to a university or college. The local facilities and amenities should be geared towards the type of tenant you plan to let to, so make sure that you property you are going to bid on fits in with your needs in terms of who you will be aiming to let the property to.

Another good idea is to go and take a look at the property before the auction – simply relying on the catalogue description of properties can prove to be a mistake, as you will be bidding on something that you know practically nothing about. If you can take a builder or similar professional along with you to see the property then all the better, as you will be able to determine what the worth of the property is and you can make a more informed decision with regards to what your maximum budget will be.

Also, always get a survey done on the property before you start bidding – this is a very important step. One industry expert states: “You will lose your survey fees if your bid is not successful, but a survey is essential. Some mortgage schemes offer a free basic valuation; however, this most basic of surveys may not be adequate, particularly if the property is old or in a poor state of repair. Just because you may be getting a bargain, don’t cut corners on areas such as survey and searches. Treat it as a traditional purchase and make sure it is a bargain, not something you may regret.”

When you are finally ready to start bidding make sure that you have your determined head on, as you will need to exercise lots of willpower. In some auction rooms the bidding can go on for ages, and many buyers have found themselves exceeding their maximum budget by thousands of pounds because there is another party in the room that keeps pushing it higher. You need to set yourself a maximum limit based on what you have seen of the property and make sure that you stick to it, otherwise you could end up paying more than the property is worth.