Buying a property at auction is both exciting and potentially profitable - as long as you can hold your nerve, says auctions consultant, Andy Thompson.
We’ve all seen ‘Homes Under the Hammer’ on TV and heard the stories of ordinary people dipping their toe into the world of “buy-to-let” and property development, as well as those seemingly very brave people buying a property at auction with a view to making it their next home. Perhaps you’ve wondered whether it’s something you could do yourself at some stage?
Then again, maybe you dismissed the idea out of hand, thinking that the whole process is just too risky, too scary and only the domain of seasoned property experts. And anyway, you probably need to be a cash buyer to go down the auction route, right? Wrong. But I’ll come back to this.
Certainly, there are lots of things you need to be aware of when buying at auction; the considerations of what to buy and where; the pit-falls that need to be avoided; and the due diligence processes that are crucial before the fun bit (the bidding!) begins.
The good news is that all of this information is readily available before the auction day itself so you don’t need to make blind decisions in the room.
I’ve recently worked with a young couple who have never owned a property before and are in the process of buying their very first home - at auction. After struggling to find the right property through the usual estate agency and online routes, they spotted a property for sale by auction. In a matter of days, the property has been viewed, the legal pack checked, their mortgage sorted and a pre-auction deal agreed. They exchanged contracts in less than a week after our first meeting and they are now confidently proceeding to completion knowing the goalposts can’t change.
The benefits of buying a property at auction are the speed and certainty of your purchase. Once the hammer comes down, you can’t be gazumped. The property is yours. And, as a general rule, these properties are cheaper than they are on the open market. So, whether you are looking to buy-to-let, buy to sell-on or move in yourself, buying at auction is a great way to make your money go further.
There’s a lot to think about and finding the right buying model and strategy is crucial to making a sound investment decision. You need to work through all the options, all the possibilities and probabilities and all possible outcomes to find the model that leaves you feeling in control, confident and satisfied with your property investment decision.
Once you have identified a property, make sure no stone is left unturned in the due diligence process, so, come the day of the auction, you’ll know exactly what you’re buying, how much you’re going to bid up to and what your end plan is.
The prospect of buying your first property at auction can be a daunting one but done properly, it is a slick, efficient and a potentially very financially rewarding process.
Andy Thompson is an auction consultant at Edward Mellor Auctions.