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Guide to buying property at an auction

by | Oct 13, 2015 | Advice, News

We were asked to write a guide for people looking to buy investment property at auction.  It was so well liked that it was printed in the guide for the Property Investor Show.  It is particularly aimed at people thinking about auction purchases for the first time, but does contain good advice for all auction buyers.  This is the article.

Hammer time! A guide to buying property at auction

So you want to grab yourself a property bargain? Auctions are a great way to buy property at competitive prices, so as autumn auction season begins, here is some handy advice from our Director Karl Griggs, to guide you through your first auction purchase:

There is more to buying at auctions than just turning up and grabbing yourself a bargain.
Make sure you do your research prior to the auction

Identify the area you wish to buy in and the type of property you wish to purchase.  Consider whether the area is suitable, the potential rental income and local management companies if you do not intend to manage the property yourself.

Make sure you know as much as you can about the property. Check the purchase prices that have been paid on similar properties in the area, check the demographics of the area online, and past and present planning applications. Make use of public registers and local council websites when researching. It is also wise to inspect the property and take a surveyor with you to make sure you are aware of any potential planning or development problems.

Look into your finance options

There are different finance options for your purchase depending on what you plan to do with the property. Look into whether a buy-to-let (BTL) loan, a regulated mortgage, short-term refurbishment finance (STL) or development finance is the most appropriate for you. A broker can help with this process, reviewing your financial circumstances and identifying the right product within the market to suit your needs. You may also be able to secure cheaper mortgage finance through a broker, by using a different property in your portfolio to raise the finance.

If you have taken mortgage finance in the form of development finance or short-term loan, you will need to confirm your proposed exit route with the lender at application stage. This would normally be either the sale of the property or a new longer-term mortgage from the same or a new lender.

If you require mortgage finance, try to obtain an Agreement in Principle before you go to the auction. Alternatively you may wish to pay for a mortgage valuation to be carried out and if suitable for mortgage purposes, you will be able to attend the auction with a formal mortgage offer. However, this is a risk as you may not be successful with your bid.

Another point to note is that if you are successful with your bid at the auction you will be required to pay a ten percent cash deposit on the day. You should check the acceptable methods of payment for this and if the auction house charge any additional administration costs.

Remember the legal and planning paperwork

In terms of legal considerations, download the legal pack from the auction website and provide this to your solicitor to review and recommend any additional searches to be carried out.
If the property is not being sold with planning permission and you might need it, make the necessary enquiries to the local council and confirm with your solicitor the associated legal costs.
As with any investment opportunity, buying a property at auction requires careful research and planning. However if done properly, the auction process can be enjoyable way to avoid the conventional drawn out process of house buying. You may find yourself walking out of the auction house with a bargain. Happy bidding.

If you are buying property to add to your portfolio, email us at contact@cpcfinance.co.uk  for a free portfolio template.