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Property Auctions

Property auctions have the main advantage that generally prices are lower (sometimes up to 50% lower) than high street estate agents. Also, the auction process is quick and produces an instant sale. You know you have bought the property once the hammer falls. No making offers and waiting for a response, or being gazumped at the 11th hour.

Auctions have become much more popular with property investors

Properties that you would not see in the high street estate agents find their way into auctions: distressed sales and "fire sales", repossessions, run-down and derelict properties, and often properties at auction are in need of some repairs or refurbishment. You are dealing in the trade or "wholesale" market here and you need to be prepared to roll your sleeves up and get your hands dirty! But, there's lots of opportunity to get a bargain and then add value.

Buying at auction can be a more risky process: you really do need to know what you are doing, to have done your homework (due diligence) and to have your finance arranged beforehand.

Contact the auction houses in the area where you are interested in buying, most of them have web sites these days, and get yourself on their catalogue mailing list. Some specialise in residential, some commercial, but most will sell both.

Once you spot the properties you are interested in, you need to act fast as there will be a limited amount of time in which to do your due diligence research and arrange your finance before the auction takes place.

Property Auction Finance is normally based on the market value of the property, not the purchase price, which means if you spot a real bargain it is possible to achieve 100% funding on the purchase. It's vital that you are aware that normally you must pay a 10% deposit on the day of the auction. You have then committed yourself to going through with the total purchase within the timescale set - usually 28 days.

Finance can be arranged for residential and commercial property auction purchases. The type of finance that you need will depend upon the condition of the property you intend to buy and its subsequent use.

You need to discuss your purchase plans with an advisor to agree a finance plan of action to ensure that the right auction funding is put in place, in time and also the most appropriate long-term solution. This process involves the preparation of a surveyor's valuation report:

  • Buy-to-Let Mortgages may be one solution and can sometimes be arranged within the timescale, but this may not always be the best solution.
  • Development or Refurbishment Finance is one solution when you need some minor or major work to the property. You may need property development finance in this situation. 100% financing can be arranged for viable schemes.
  • Bridging Finance is usually the preferred solution for auction purchases because of the timescale involved. This type of finance is quite appropriate for auction purchases and is not necessarily expensive. There are some very competitive deals available if you know where to source them.

Commercial mortgages and finance can be arranged for limited companies and for private individuals with good credit histories. Even those with problem credit histories, county court judgments (CCJ's), arrears or IVA's can be accommodated.

Property auction purchases have become more popular as demand for property and property investment has increase over the last 10 years or so. The number of properties sold at auction since 1999 has risen by around 70% - around 20,000 residential homes are now sold through UK auctions each year.

This has undoubtedly had an effect on prices and in some cases properties at auction have been fetching almost retail prices you would expect to pay in the high street.

All the more reasons to use caution when buying at auction: calculate exactly what the property is worth to you and don't pay more.

What you should do:

  • Find yourself a bargain - search the internet auction lists, the auction catalogues and visit the sites. Get yourself on the auction catalogue mailing lists.
  • Arrange formal viewings and research the area thoroughly. Walk the streets, ask the local estate agents and commercial agents for information about nearby rents, sales, tenant demand.
  • Do internet environmental searches and planning and use searches. Make sure you are able to get planning approval.
  • If you don't have the necessary skills yourself, have an experienced builder check over the property for structural, damp, timber problems.
  • Do your estimates: building work, refurbishment and fitting out, letting costs, financing costs, legal and professional fees, plans drawing, planning and change of use costs, valuation costs. Know exactly what the project is likely to cost you then add 10% for contingencies.
  • Calculate your expected returns on the investment project and know exactly what the property is worth to you as an investment - don't get carried away and pay more.
  • Arrange your finances - speak to your advisors - LandlordMONEY
Buying Bargains at Property Auction by Howard Gooddie - Every week, hundreds of properties - both residential and commercial - are sold at auction in Britain. No longer the closed domain of property speculators and dealers, auction rooms are now filled by a growing proportion of private individuals looking for genuine bargains in the face of otherwise inflated prices in the property market. Property auctions are in author Howard Gooddie's blood. He comes from a family of auctioneers and was head of one of the country's leading auction houses.  This guide features: How to find your bargain; Contracts; Finance; Bidding and winning your bargain; After the auction; Insider's guide to an auction house; Selling your property at auction Check-lists; and Directory of auction houses.  More Information / Buy Now

Information here is general only & believed to be correct, though we cannot guarantee it, nor do we accept any liability if you act or fail to act on this information. Always seek professional advice before making decisions. Investments can go down in value as well as up over  time.