Property auction pitfalls
1. Don't delay organising your finances
It's essential to ensure you have your money organised prior to attending an auction - you just won't have the time to sort it out after. Once the hammer falls, the highest bidder will be expected to pay the 10% deposit on the day, and completion will usually take place 28 days (or possibly 14 days) later. Of course, you could go to the trouble of organising your finances in preparation for buying a property at auction and then be outbid on the day. But you shouldn't see this as wasted effort because once your funds are in place, you can always bid on other properties that come up.
2. Know your legal commitments
If you buy a property at auction, you are legally obliged to complete on it 28 days or less after the auction. Failure to do so could mean that you are liable for the sellers costs of re-submitting the property to auction and, if it sells for less than your bid, the difference in price.
3. Check what you're buying
Many auction properties have defects associated with them, for example problems with the structure of the property or issues with the title itself. You need to make sure you are fully aware of any defects and understand clearly what you are buying. Some mortgage lenders will not advance the full amount of loan until such defects have been rectified, so if you are aiming to borrow most of the money to purchase your auction property, you may find that you are unable to do so.
4. Check your property's credit history
Many repossessed properties end up in the auction rooms and, although this means that there are bargains to be had, buying a repossessed property can come with other problems. The previous owner may have had bad credit, which could show up on your credit file by mistake if you are moving into the house. It's worth checking with a credit referencing agency to ensure this isn't the case and if it is, you can get any mistakes corrected.
5. Check for planning approval
The nature of auctions means that lots of unusual development opportunities crop up, such as church or barn conversions. These can be dream properties, but before you get carried away take care to ensure that any major renovations you're considering will get planning approval. Many properties will already have at least outline planning permission, but for those without it, you shouldn't just assume that it will be forthcoming. It's a good idea to discuss your plans with a planning consultant or the local planning office to get a feel of whether or not your proposals will be approved.
6. Do your own research
The information in the auction catalogue is not always accurate. Don't take it as the gospel and do your own research as well. The fine print usually states that the auction company cannot be held responsible for the accuracy of information printed about any property. Even basic things, like whether the property is freehold or leasehold can be wrong! You should always request the Legal Pack for any property that you want to bid on at auction, and get your solicitor to do the necessary research so you know exactly what you are getting into.
7. Beware of auction room trickery
You need to have your wits about you in the auction room itself and be aware that the auctioneer may use techniques like 'bidding off the wall'. This is a perfectly legal practise where the auctioneer will invent a bidder to give the impression that there is more interest in the property than there actually is. He can only do this up to the reserve price. Another trick is for the seller to use a friend to make a 'dummy bid', to inflate the price.
8. Pay a visit to potential properties
The amount of information about a property shown in the catalogue or on the auction company's website can be quite brief. There could be lots of vital information missing and the only way to get an accurate picture of the property, its condition and its location is to go and visit it. Sometimes the auction company will only have certain dates or times available when anyone interested in viewing must attend, but this doesn't stop you doing a 'drive by' viewing at any time.
9. Don't get carried away!
It's easy to get caught up in the excitement on the day - particularly if you have set your heart on a particular property. The drama of the auction room can turn even the most cool-headed buyer into a frenzied bidder. Work out your maximum price prior to the auction and stick to it. If you don't trust yourself to do so, then get someone else to bid for you.
10. Pay for a property valuation
You could shell out on valuation fees etc and be unsuccessful on the day. However, as with the point about raising finance, its better to have got this all done in anticipation of being successful, than buying a property at auction without having had the necessary surveys done and get a nasty surprise later down the line when you are already committed to buy.