How to Buy Repossessed Properties at Auction
Due to the present economic crisis, the housing market has been in turmoil in the last one year and, as a result, there has been a huge increase in house repossessions – many of these end up at auction. Repossessed homes sold at auction typically go for anything between 20% -50% less than their market price, meaning they pose extremely good value for private buyers and investors alike.
Although there are some horror stories regarding repossessed houses being inhabitable or without bathroom and kitchen, the majority of repossessions are in good condition – they are simply houses seized back by the bank after their owners could no longer finance reimbursement on their mortgage.
If you are planning to buy a repossessed house at auction, look out for the property section of your local paper: real estate agents sometimes advertise such properties and call interested parties to bid. Also, you can subscribe to a property auction mailing list; the company in question will then send you details of forthcoming auctions, either through the post or by e-mail.
Considering the following tips might help to succesfully purchase repossessed property at auction:
* Be prepared by doing your research beforehand: if you are unfamiliar with property auctions, visit a couple to get well acquainted with them. All properties in the auction will be in the auction catalogue, with detailed description|description and guide price, and conditions of sale: these are legally binding, so make sure you read thoroughly
* If you are interested in a property, always visit it before the auction starts – do not rely on the catalogue description. You will need to see the building with your own eyes to make sure it is in good state
. It is necessary that you get a survey done on any property you are interested in, in sequence to recognize structural problems if there are any.
Primelocation.com can provide you an idea of how much similar properties sell for in a particular area, so you can bid accordingly, and upmystreet.com can give you general information about an area, such as crime levels, socioeconomic background and amenities.
* Be sure of your budget prior to the auction and do not exceed this. You can get easily carried away with bidding in the auction room, but it is important to stick within your budget for affordability reasons. If you cannot trust yourself to do so, consider taking somebody with you to the auction or get an auctioneer to bid on your behalf.
* Bidding at auction: you will be able to get access to a selling pack regarding any properties you are interested in, and this will hold details of local authority and environmental searches, leases, title deeds, and fixtures and fittings form (outlining all fixtures included in the sale).
If you are purchasing a house for letting, it is important to know a little bit about the area you will be buying into. Most importantly, the rental market there should be strong – towns or cities with universities and major hospitals usually have a considerable number of tenants.
* Arrange finance or a mortgage prior to the auction: If you bid on a property and win the auction, then you are legally required to pay a 10% deposit on the day and complete within 20-28 days. If you cannot complete within this time you will lose your deposit, so make sure you have the required amount of money in place.
It is important to also take into account the cost of any renovation works needed, as well as any other associated costs, such as solicitor’s fees, insurance, and stamp duty. For properties costing over £175,000, stamp duty is 1%, 3% on houses in the £250,000-£500,000 bracket, and 4% on property worth in excess of £500,000.
Michael O’Flynn, head of content for FindaProperty.com, states:
‘In recent years auctions have become an increasingly popular way to buy and sell property; so much so that the number of flats sold at auction annually has increased by 40% since 2000. Over the same period, the number of houses sold has increased by 30%.
Provided you know what you are doing, auctions can be a great way to make a quick sale and the perfect place to pick up a bargain.
The lack of mortgage finance and a rise in the number of repossessed properties means that this trend will probably continue in the coming year.
However, buyers with little experience should approach the auction room with caution. Seek professional advice, set a limit beyond which you will not bid, and be sure to do the due diligence before you enter the auction room. Once the hammer comes down you have only 28 days to complete – so be sure you have the finance in place and know exactly what you’re bidding on’.
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