If you’re thinking of buying at auction, bidding is the least of your worries. Before you set foot in the auction room you must have done your homework.
Check out the auctioneer’s catalogue and don’t go in blind. Check the properties you’re interested in. Find out as much as you can about them:
Then you need to get your calculator out and work out the maximum price you can realistically pay for this property, to ensure you have profit built in after any work that needs doing.
You’ll also need to calculate how long any refurb is likely to take and KNOW (not guess) how much it will cost to do it and how long will that take. If you’re experienced in refurbs and you’re not doing it yourself, always add extra time in to allow for hold ups.
You’ll also need to check out your return on investment and your plan when the property is ready for either letting or selling.
You can make an offer to the vendor or their agent before the auction. It may not be accepted, as most auction seller prefer to see what it will fetch in an open auction room but nothing ventured, nothing gained.
Another great opportunity to buy at auction is ‘unsold lots’ – properties that failed to sell on auction day because there was no bid high enough to meet the sellers reserve price. You can make post-auction offers on properties that haven’t met their reserve - and sometimes get accepted, even if your offer is still below the reserve.
The secret is to turn up, knowing what you’re interested in and how much your maximum offer is – with an understanding that you can finance the deal if yours is the winning bid. Don’t get carried away and bid past your calculated maximum - all you’re doing is giving away your profits.
Remember that, while typically properties bought at auction must be completed is 28 days, some auctioneers may require completion in as little as 14 days or extend the period to 42 days. There is a danger of losing your deposit if you don’t complete in the specified time frame. In auctions, contracts are deemed to have been exchanged at the fall of the gavel.
If you don’t complete within 28 days at auction give your seller the right to retain your 10% deposit for breaching the contract. Getting a mortgage to completion in this time frame is usually a real nail-biter, so the best way to ensure you don’t end up in this situation is to get a bridging loan in place ready to go. Bridging can be completed well within 28 days, and even 14 days is possible.
That’s why most properties purchased at auction are made with either cash or bridging finance.