Property auctions are great for getting property at a bargain. For one, you do not need to pay any commissions to a real estate agents. If you bid successfully, the transfer process is also fast-tracked so that you can own your property within a very short time. However, buying property at auctions is risky, and you must be armed with necessary research before attempting to bid. This article describes how to go about preparing and bidding for property successfully.
1. Conduct your research
Buying auctioned property can turn out to be very profitable, but only if you've done your homework. Remember that once you bid and the hammer is stricken, you're in a binding agreement that will see you gain ownership of the property within less than a month. It isn't something you should go into lightly, just because you're getting it at a bargain.
The first step is to get the auctioneer's catalogue in good time and research properties you may be interested in. Once you've identified a property, arrange for a viewing. You're advised to go more than once. Remember that properties are auctioned because owners are cash-strapped, and hence the place will probably be in disrepair. Consider having a professional survey and search to unearth any potential problems as well as a contractor to come in and detail the cost of revamping the place.
2. Work on conveyancing
If you've not been thrown off by the disrepair, the next step is to get copies of the legal pack, which are available at the auctioneer's. Use your trusted conveyancing solicitors to digest the information in those documents. You should be advised on any title issues (e.g., obligations for land rates, property maintenance costs, service charges, access ways, etc.), contents of searches done on the property and any additional searches that may be deemed necessary.
It may be pricey to invest in legal advice, particularly if you're not sure you're going to win or even bid on the property at all, but not receiving sound legal guidance could leave you with a nasty surprise once you've gone ahead. If you bid successfully and change your mind, you'll forfeit your deposit, and the auctioneer can sue you for breaking contract. See if you can negotiate for a fixed legal fee, which is often cheaper.
3. Set your bidding limit
Ensure you have all your financing in place, because auction deals move very fast from the moment the gavel falls. You should know the maximum amount you're willing to spend, and be disciplined enough not to go above it. If buying on mortgage, you should have your preapproval before going to the auction house. Remember the auctions are adrenaline-fuelled, and you can easily get carried away if you haven't set your spending limit.