Buying a House at Auction is Very Good Investment
Below is a MRR and PLR article in category Finance -> subcategory Real Estate.
Buying a House at Auction: A Smart Investment
Overview
With house prices continually rising in popular areas, many homes are already sold by the time real estate signs appear. It's important to explore alternative options beyond traditional estate agents, and property auctions present a compelling opportunity.
Why Consider Auctions?
Each year, approximately 40,000 properties are sold at auction in the UK, often at prices up to 30% lower than those on the high street. Auction houses often deal with unique properties like churches, village halls, and commercial spaces with potential for residential conversion. Properties requiring renovation are also popular at auctions, where you'll often compete with professional developers.
The Auction Process
Buying a property at auction demands detailed planning, attention to detail, and a steady approach. If executed well, you could secure your dream home at a great price. However, without careful preparation, hidden issues like dry rot or planning restrictions could turn your bargain into a costly mistake.
Getting Started
Around 250 companies organize residential property auctions annually in the UK. For instance, FDP Savills conducts numerous national and regional auctions throughout the year, emphasizing the strong demand for all kinds of properties, including those needing refurbishment.
Auctioneers provide catalogues of upcoming auctions at least a month in advance, giving you time to research thoroughly. Inspect the property and its surroundings, commission a survey, consult your solicitor about the property's title, and arrange financing. Successful buyers must complete the purchase within 25 days of the auction, and you should be prepared to insure the property immediately.
Preparing Your Bid
Set a maximum bid before attending the auction. Calculate total costs, including repairs, survey fees, mortgage, legal fees, and removals. Remember, a buyer's premium of about 1.5% will be added to the selling price, along with stamp duty.
Be mindful that pre-sale catalogue prices are often set low to attract bidders. The actual sale price is determined on the auction day, starting at the reserve price?"the minimum the owner will accept. Once this price is met, the seller must sell to the highest bidder.
After Winning the Bid
If you're the successful bidder, you'll sign a binding contract immediately post-auction and pay 10% of the property price via cheque (cash is not accepted). To build confidence, attend a few auctions beforehand to observe the process. Also, check with local estate agents to understand the market price for similar properties.
By following these steps, buying a house at auction can be a profitable and rewarding experience.
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