Copyright (c) 2011 Robert Gray
The 'traditional' way of buying a property - i.e. signing up to an estate agent's mailing list, making appointments to visit properties you like the look of, putting in an offer and waiting to see whether it is accepted, hoping the chain you are in does not fall apart before you have exchanged contracts - is no longer the only way to go about purchasing the home you desire. Television programmes, such as 'Homes Under the Hammer', have raised the public's awareness of being able to buy a property at auction but, beware, it is not always as simple as it is made to look on TV! This article looks at how a property auction works, how you can prepare for bidding at an auction, the advantages of an auction over the 'traditional' conveyancing process and the pitfalls to watch out for.
Every property that is going under auction will have an Auction Pack associated with it. This will include the title deeds, the searches and a Property Information Questionnaire. Each person that is interested in the property should ensure that they acquire the corresponding pack before attending the auction. The time and date of the auction will be set and this will be advertised in the auctioneers' mailing lists and information packs. The property will usually have a reserve price placed upon it. This is the lowest price that the vendor is obliged to sell the property at. If the bidding does not reach the reserve price it will be down to the vendor's discretion whether to lower the reserve price (though they cannot, at any point during the auction, raise the reserve price). The highest bidder at the time the hammer comes down will be the new owner of the property and will be legally obligated to carry through the transaction. The successful bidder will be required to pay a deposit at the auction and will be legally obliged to produce at least two forms of identification.
There are several things you can do to make sure you are prepared for the auction. You should view and research the property you are considering bidding on - just as you would if following the conventional conveyancing route. Instruct a conveyancing solicitor to look over the Auction Pack and ensure that all the paperwork is in order. You should also attend a couple of auctions, prior to the one at which you intend to bid, so that you have a feel for how auctions work in reality and know what to expect when it comes to the real thing. You also have the option of entering a pre-auction bid but, to be successful, these are usually pitched quite high.
There are many advantages of buying a property at auction. The main advantage is that you avoid the, often long, drawn out and stressful, 'traditional' conveyancing process. The auction process is quick - rather than having to wait months to finalise the conveyancing process by taking the conventional route you will know within a matter of minutes whether you are the new owner of the property. There is also no chance of being gazumped at auction once the hammer has fallen!
You should also be aware of the pitfalls of buying a property at auction. The process is speedy and very 'final' - when the hammer falls, if you are the highest bidder, you become the new owner and are legally obliged to purchase the property. There is also, of course, the chance that you will not be the highest bidder at the auction so you need to think very carefully before deciding on the amount you are going to bid (whilst the attraction to many people of buying a house at auction is the prospect of getting a 'bargain', you can also lose out on the property completely if you are out bid).
Buying a property at auction can be an extremely satisfying way of purchasing your next home - do your research and make sure you are as prepared as you possibly can be before taking that big step.
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Article Added on Wednesday, July 18, 2012
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