One of our Directors, Julie Griggs, provided an advice column on buying property at auction for Sarah Beeny’s At Home magazine. You can see the original article on the At Home website, or we have reproduced it below.
So you want to buy a property at auction? Auctions can seem complicated at first, but here are six top tips to guide you through the process:
1) Do your research
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.
2) Investigate your finance options
There are different finance options 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.
3) Find out everything you can about the property
Check the purchase prices that have been paid on similar properties in that area, check the demographics of the area online, and current and previous planning applications. Use public registers and local council websites.
Inspect the property and take a surveyor with you to make you aware of any potential planning or development problems.
4) Legal considerations
Download the legal pack and provide this to your solicitor to review so they can recommend any additional searches to be carried out. Make the necessary enquiries to the local council regarding planning permissions and confirm with your solicitor any associated legal costs.
5) Look at securing mortgage finance before you buy
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.
If you have taken mortgage finance in the form of development finance or a short-term loan for refurbishment, ensure you have an exit route in place.
6) Enjoy, but do not get carried away on the day
Have in mind a maximum amount to bid. If you are successful, you will be required to provide a 10% cash deposit on the day, as well as ID documents and proof of residency.
If you are creating a portfolio of properties keep this updated after each purchase or refinance. Email firstname.lastname@example.org for a portfolio template.
Use a mortgage broker as you may be able to secure cheaper mortgage finance by using a different property in your portfolio to raise the finance. It is useful having the funds in your bank when attending the auction for extra peace of mind
Author: Julie Griggs, Director