Buying a property at auction can be a thrilling and daunting experience. Unlike traditional property purchases, when the gavel falls at an auction, you’ve officially exchanged contracts, committing you legally to complete the purchase, usually within 28 days. The exact terms are set by the auction house. This process can be intimidating for bidders, as there’s no backing out once you start bidding, unlike in standard property buying where deals can be dropped before the exchange. In today’s Daily Mail, their property expert describes her journey through the auction process.
Preparing to Bid
When she registered to bid on a wreck at an online auction, she had to drastically adjust her approach. Initially, she was willing to pay well over the low six-figure guide price. However, after thorough research and due diligence, she slashed her budget by £100,000. Auction properties often fetch prices much higher than the guide price, and it’s crucial to avoid over-investing in a project, especially if the end value doesn’t justify the costs.
Inside the Legal Pack
Understanding the legal pack is critical. This pack includes:
- Auctioneers terms of business
- Special Conditions added by the vendor, often with additional fees
- Title Register and Title Plan, outlining property boundaries
- Energy Performance Certificate (EPC), indicating energy efficiency
- Property Information Form (TA6), with details on disputes, charges, and environmental issues
- Fixture & Contents Form (TA10)
Andy Thompson from Pugh Auctions emphasises the importance of scrutinising these documents. Overlooking them can lead to unexpected costs, significantly affecting your budget.
The Importance of Surveys
While some might skip a property survey to save costs, it’s a risky move. Discovering issues post-auction is too late. A survey helps in budgeting for necessary work and provides a clearer picture of what you’re buying into.
Financial Planning
Financing an auction purchase requires foresight. It’s a myth that auctions are only for problem properties or cash buyers. When the gavel falls, you need to be ready to complete the purchase, or you risk losing your deposit and facing further financial penalties. Funding options vary from cash, mortgages, to bridging finance.
Traditional vs. Modern Method Auctions
In traditional auctions, including online ones, the hammer’s fall signifies a contract exchange. In contrast, the ‘modern method’ only leads to an exclusivity period. Here, you pay a reservation fee, and after 28 days, you have the option to exchange and later complete the purchase.