When it comes to investing in property, you might have thought about a lot of factors, such as they type of property you are looking for, the area you want it to be in and the way in which you intend to finance it, but have you thought about the way that you intend to buy it. For many property investors, auctions have often proved to be a very fruitful method but is this actually the best way for you to invest in property.
Here, Auction News take a look at how property auctions work and what the advantages and disadvantages can be in order to help you determine whether this is the route that you should be taking.
Subscribe To Our Newsletter
What are property auctions?
In a property auction, one or more properties are put up for sale, allowing buyers to bid on them at the same time. A guide price will usually be set by the auction house to allow buyers to get some sort of idea what the property should be worth, and properties will often be withdrawn from the auction if they do not achieve the guide price. It can sometimes be possible to visit the property for a viewing before the sale takes place, but many auction properties are often sold unseen.
In a property auction, one or more properties are put up for sale, allowing buyers to bid on them at the same time. A guide price will usually be set by the auction house to allow buyers to get some sort of idea what the property should be worth, and properties will often be withdrawn from the auction if they do not achieve the guide price. It can sometimes be possible to visit the property for a viewing before the sale takes place, but many auction properties are often sold unseen.
You then need to wait for the property you want to come around before you can start bidding. You might find that you are the only one vying for the property, or you might have a lot of competition, and bids can go up at a rapid rate.
Auctions tend to feature properties that the owners want to be rid of relatively quickly, as they can be fairly confident that it will sell on the day of the auction, and the process will not be strung out across weeks or months. This means that there are often some bargains to be had, making it particularly popular with property investors who are looking to make a profit.
Advantages of property auctions
One of the biggest advantages of a property auction is that it can make the process of buying a house much quicker and easier than doing it through an estate agent. The property will be advertised for a few weeks before the auction, and if you are successful, the contract will be signed immediately and the whole process can be completed within a month. Once the deal is done, it will not be subject to lengthy delays from other parties or breakdowns in communication.
Whilst the bidding process can get carried away at times, you do have the advantage of knowing what everyone else is offering. This makes it harder for anyone to play games or gazump you, and the sale will simply go to the highest price, not the person who bids first or is in a better position.
Property auctions tend to have a wide range of properties on offer, and these can often be quite different to the types of properties you find through other methods. This means that there is a great chance that you can find a bargain or a hidden gem that you might otherwise have missed.
Subscribe To Our Newsletter
Disadvantages of property auctions
Whilst speed can sometimes be a virtue, it doesn’t work for everyone. That means if you are not prepared to move quickly and do not have funding and solicitors in place, the whole process can become very overwhelming.
One of the biggest issues with property auctions is how easy it can be to go over budget. When the bidding process starts, adrenalin kicks in and it can be very easy to get carried away. If you find yourself in direct competition with one or more other bidders, the numbers can start to go up very quickly, and you can kid yourself that your next bid will be the one that kills the others off, causing you to keep going. If you intend to bid at an auction, you need to have a budget in mind and be very strict with yourself.
You also need to be aware that you could be buying a property that is less than perfect. It may have structural problems, lease issues, access issues or defective or restrictive covenants. Sometimes this may not be uncovered until after the auction and as contracts are exchanged and deposits paid immediately, this information can come too late for you to back out.
If you have done your research on a property, then you may well have paid for surveys and solicitors before the auction begins. This is fine if you end up with the property in your hands, but if it goes to someone else then all of this time and money will have been for nothing.
Property auctions can be an exciting and effective way of investing in property, but you need to be prepared. Make sure that your finances are in order and that you have done as much background research on your chosen property as possible to ensure you are not buying into a whole world of problems. As auction properties can be bought for some great prices, there is plenty of opportunity to make a profit, but only if you do not get caught up in the bidding process.
If you want your auction to be successful, then set yourself a maximum that you are prepared to pay for it and make sure that you stick to it, no matter how the bidding is going, and you are much more likely to walk away with a fantastic addition to your portfolio.
Tom is a Digital Content Writer passionate about sustainable property & property trends. Regardless of the subject, he will always write blogs of the best calibre. Read more about Tom here.
Be the first to comment