We all love watching home programmes. Whether it’s Homes Under the Hammer or Grand Designs, we’re a nation that loves peeking into what other people do with their properties. As we’ve followed shows like these over the years, it can leave many of us longing for the thrill of buying a property at auction! But what are the risks of buying a property in this way and do they outweigh the positives?
What is a property auction?
Thousands of homes are sold every year at an auction. While it was once only a popular way for investors and buyers looking for properties to do up and sell, it’s now beginning to attract mainstream buyers and sellers too.
They’re often planned months in advance, with auction houses releasing catalogues of properties to potential bidders ahead of the auction date. Each is listed with a guide price, what the auction house or seller thinks it could be worth. It’s important to remember that this is different from the reserve price which is the minimum a seller will actually accept – although this is often confidential.
Auctions aren’t for the faint-hearted and can get quite intense when the bidding starts! If you’re worried about heading to your first one, it might be wise to invite someone along for support or ask somebody who has done it before for advice.
What are the pros of buying at an auction?
There are a number of positives to factor into your decision when deciding if buying through an auction is right for you. With so many great and surprising deals to be had, it can be hard to imagine how you’d get a property for that little if you purchased it on the regular housing market! The auction process also means that a sale can be completed much faster than if you purchased through an estate agent, and sometimes in as little as 28 days after the auction! So, if you’re wanting to move or start a project quickly, it might be for you.
You’ll also find that buying through an auction house is sometimes a more reliable way of purchasing, especially in terms of contracts. These are signed straight after the auction with no worry of it falling through last minute.
What are the cons?
Remember it is an auction, so you could be outbid at any time, meaning you could have wasted time viewing the property and having a survey conducted. You’ll also need to have the money ready, paying the deposit on the day and only having a limited number of days to transfer the rest. Making sure all your finances are in order before the day of the auction is crucial to a successful day.
Auctions can also be hit and miss. For example, if you’re looking to buy a house to do up, they can sometimes be money pits. There might be hidden structural damage which you may only find out once the contracts have been signed, leaving you with little option but to foot the bill and get it sorted. This could mean dipping into your savings or sourcing funding from elsewhere to cover the costs.
Whether you decide to try your hand at a property auction or not is up to you, but like with anything, it’s important to weigh up the pros and cons before you head there for the first time.