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Buying A Property At Auction

Buying a property at an auction can be a great way of getting a property at a lower price than it is worth. However, you need to be careful that you don't buy a property that will cost too much to develop. Before you plan to bid for a property it is best to visit a few property auctions to get used to the proceedure at an auction and the tactics of the bidders.

Why is the property being sold at auction?

There are a number of reasons why a property may be put up for auction rather than being sold via an estate agent.

 

• The vendors may be in need of the money quickly and therefore cannot wait (perhaps the vendors needs to sell this property so the purchase of their dream property does not fall through).
• It may have been repossessed by a mortgage lender (repossessed properties are often sold at auction).
• Where the owner of a property has died, and the executors or beneficiaries need/want to ensure that the property is sold fairly and for the best possible price.
• Perhaps there is a major structural problem with the property that has makes it difficult to sell in the normal way (a mortgage might be difficult to get).
• There might be a problem with its location (it might be in a run-down part of town or next to a noisy factory).
• It may have a sitting tenant (this could be a good or bad thing depending on your plans for the property).

Arrange your finance before the auction

Before you bid at an auction make sure that you have the finance arranged. Normally if you buy a property at auction you need to pay 10% of the price immediately and the remainder 28 days later (this may vary country to country).

The guide price

This should only taken as very rough guide to the amount the property may sell for. It is often set very low on purpose to generate interest in the property. If a number of people are interested in a property it may sell for more than twice the guide price.

If the reserve price is not reached

If during the auction, the property does not reach the reserve price that has been placed on it, the auctioneer cannot sell it even though there are bids for it. After the auction has finished it is often possible to talk with the auctioneer to try and negotiate a price to buy the property.

Set your limit and stick to it

It is easy to get carried away at an auction and keep on bidding for a property even though it has gone higher than the maximum price you decided before the auction started. Remember, the more you have to pay to get a property, the lower your profit will be.