Interested in auction property in UK?
Being property at auction has become increasingly popular in recent years. For that matter, so has selling property. For those looking to unload an undesirable property, auctions offer the chance to appeal to a different type of buyer and effect a sale on an accelerate timeline. For prospective buyers, this is a chance to view properties that might not otherwise come onto your radar, find some diamonds in the rough, score a bargain or otherwise meet your purchase and investment goals.
If you are looking for the right property at the right price, is an auction the right path? Let’s look at some key information you need to make your decision.
Auction Property UK: The Basics
Auction sites and catalogues can seem like a bargain hunter’s paradise. Flats in the city for less than £200,000? A five or six bedroom townhouse for £25,000? A two bedroom terrace in the countryside for £5000. It boggles the mind. But there is a reason why these properties are priced so low. Or, more likely, there are several reasons! They often need tens of thousands (or more) of renovation work. They are often uninhabitable. They are often the most extreme definition of “‘fixer upper’ you can imagine.
Still, for people with the money, the resources, the connections and the time to invest in repairings, renovations or razing the whole lot and starting over, it can be a good deal to buy property through an auction. If so, they will face more competition and bidders with bigger pockets. In the pst few years, there has been a marked growth in interest for auction properties.
This can push the price up, particularly for more desirable (or less dilapidated!) properties. This is good news for sellers, but it is certainly a factor to consider when it comes to buying a ‘bargain’ that’s going to need a lot of work.
How Does This Process Work?
One of the benefits of an auction on the part of sellers – and buyers too, for that matter – is that they can complete a sale relatively quickly. The person who makes the winning bid needs to pay a deposit or reservation fee that day. At a traditional auction, they exchange contacts and make a 10% deposit then and there. They then have 28 days to pay the balance and complete the sale. If they suddenly get a case of buyer’s remorse… they walk away without their deposit.
It works a little differently at a modern auction (i.e. online-based). The winning bidder pays a 5% reservation fee on auction day. They have 28 days to exchange contracts and pay a 10% deposit, and then another 28 days to pay the balance and complete the sale. There is a bit more time built in to allow buyers to arrange for financing, if needed.
There is usually a buyer’s fee as well. This is generally about £1000 + VAT. Some properties have a ‘buyer’s premium’ attached. This is made known before the auction so bidders are aware. The premium is a fee on top of the winning bid.
What Should You Do?
If you are interested in auction property in UK, be sure to scour the listing, which will be either online or published in a catalogue. Ask for the legal pack, which contains key documents related to the property, and arrange a viewing. Yes, you can get a great bargain and you are going into this knowing that properties will likely be distressed – but you really need to see it for yourself (or have a representative do so on your behalf). It is just as, or even more, important to do your due diligence when it comes to an auction as it is with a conventional sale.
Always weigh the pros and cons of any investment decision and be aware of what you are getting into. Yes, you can find a diamond in the rough, but to polish it, you may need extensive resources. Factor in the costs of repairs and renovations on top of that alluring starting bid price! And remember, you will be up against bidders with bigger budgets and more experience. Remember that this is a binding deal, and you need to be as prepared as possible.