Have you ever considered buying at auction? Have you ever thought about the extra risk, complications or requirement of specialist knowledge? Well, think no more because these are all common misconceptions! For many, it can be a great way to access your next home or property development or property investment opportunity where you can add value, so long as you understand how the auction process works.
Why would you buy at Auction?
Most people who buy at auction do so because they’re looking for a lower-priced property, whether it’s to live in or to rent out as a buy to let investment or to develop or renovate with the intention of adding value to then resell the property. Buyers may be looking for repossessed properties or an empty plot of land to self-build their home, or maybe they’re just fed up of being gazumped (where a seller is forced to either drop the sale price or lose the sale as a result of the other party changing their offer), which is a common experience when buying via an estate agent, especially in a crowded, competitive market! Auctions are great places for investors to find properties that are already tenanted and they typically offer a wide range of property types from commercial to residential, to vacant land to already tenanted properties, this enables buyers to reduce time searching for agents who specialise in different property types and could reduce the number of phone calls and emails you need to make to arrange viewings.
Properties that often make it to auction are those which are un-mortgageable, are unusual in terms of aesthetics or building materials or have issues (some may be repairable, others may not be) but there is a misconception that these property types are the only properties sold at auction; in fact, we sell all types of properties in any condition (good and bad) in any style; you can even sell windmills and narrow boats! Sellers who sell via auction typically do so because they want a faster sale without the high estate agent expenses, some auctioneer agents, like Harry Albert Lettings & Estates, can sell your home in a maximum of 28 days without you paying any fees to sell your home.
Buying a property that isn’t up to par with the type of homes you’d see in an estate agents window can have its benefits; naturally, it will be a more affordable home and the problems can be easy to fix and by doing so, the value of the property increases meaning you could sell it for a property, or remortgage the property to enable the purchase of a second property to live in or rent out or you could rent the property out for substantially more because of the higher quality living space created by not having to regularly carry out repairs after the tenant has moved in with the rent being used as equity to the buyer for more purchases.
Windmills and lighthouses are often some of the quirky listings you see at auction and other properties which are out of the ordinary are usually available that wouldn’t be offered through your typical estate agent.
Finding the right auction property
Prior to going to the auction, you should visit the property and, if you’re inexperienced, instruct a surveyor to carry out a property survey. Sometimes, you may be refused to view the property by the seller or the tenant if they live in the property; it’s recommended to stay clear of purchasing vacant properties where the owner refuses to allow viewings as there might be something catastrophically wrong with the property.
However, where a tenant or seller lives in the property and refuses, a viewing fee may be appropriate to offer to them in exchange for a quick tour of the property; the queen’s head talks, even if it’s on a single £10 note. By paying a small fee to view the property, you’ll get to see the internal condition of the property where other people may not have been able to, this means some buyers may be deterred if the outside of the property isn’t to a high aesthetic standard and, you could find a real bargain by doing so!
How to make a profit on your purchase
A lot of auction buyers are looking to flip properties to make a profit when they resell the property. So, how do you make a profit on an auction property? First, you should check what sort of property it is and the area it’s in and compare it to properties for sale and recently sold on Rightmove or Zoopla, or other property portals to get an understanding the full market value. Then, you need to get a feel for what costs there’ll be to bring the property up to scratch to be sold on at market value, in doing so, you will be able to work out a purchase budget which you must not deviate from!
After you’ve factored in repair/renovation costs, you’ll find a lot of your profit has been reduced. When Harry Albert Lettings & Estates assists buyers with flipping property (buying properties cheaply to resell at market value, often called wholesale property investing), we aim to achieve £40’000-£60’000+ profit on each venture but it can be difficult to pinpoint the exact profit margin on each house or land purchase when it comes to buying at auction as you won’t always be fully informed as to what work needs to be carried out.
Where to find auction properties
A great place to use to search all of the auctions is Harry Albert Lettings & Estates dedicated property auction website where we collate all of our available auction properties in the UK on one easy-to-use website, where you can even place bids on the online property auctions or book a viewing. You will need to pay a solicitor to go through the legal pack and dig out any issues, they will often do this for a few hundred pounds for you or you can use our legal team for a fraction of the cost!
Lots of people will go to the auction in person, more out of excitement than anything; the atmosphere in the auction room is buzzing with enthusiasm and it gives buyers an opportunity to not only see who else is bidding but to also network with other investors, potentially striking up a joint venture partnership. If you choose to attend the live auction, you’ll need to register with the auction house prior to going along and usually you’ll need to provide identification, when you arrive, you’ll need to check in and sometimes might have a quick form to fill in. You’ll be given a number that will tie you to your winning bids.
Some people bid by telephone and you’ll see many people in the auction room glued to one or more phones as they repeat what the auctioneer says, the previous bid and occasionally, they’ll shout their client’s bid. You can also bid by proxy via the post or the internet; internet bidding is like the new version of selling your home on eBay.
When you do purchase, you’ll usually put down 10% as a deposit, plus any other fees required. You may lose your deposit and any fees you pay if you pull out of the sale! When you are the winning bidder on a property sold at auction (called a ‘lot’), you’re bound by contract as soon as the hammer falls and you’ll exchange contracts that day. You’ll know when the property is about to be sold as you may hear “going, going, gone’” at which point the auctioneer will bang the hammer to close the sale; if you were the last bidder, congratulations, you’ve won! Completion typically occurs 28 days after contracts have been exchanged.
A lot may be subject to a reserve price, this is the minimum the buyer will accept and, if bidding doesn’t reach the reserve price, the property won’t sell. By law, the reserve price has to be set no more than 10% either side of the guide price and it’s extremely unlikely (as it’s simply illogical) that you’ll see a reserve price greater than the guide price.
Selling your property at auction
Sellers prefer selling via auction as there’s no chain, it’s quick, it’s easy and there’s little chance of the buyer pulling out as doing so will cost them their deposit and any fees paid.
When it does come to preparing the property for sale, it’s usually best to instruct an estate agent who sells via auction at least 6 weeks before but when you instruct Harry Albert Lettings & Estates, they’ll be willing to make concessions to ensure your property is brought to market as soon as possible!
There’s many benefits of selling your residential or commercial property or land via Harry Albert Lettings & Estates, including:
- No estate agent or auction fees! The buyer pays our commission so your house gets sold for free!
- The most secure deal on the market! Once the sale is agreed, the buyer immediately pays a non-refundable payment committing them to the purchase which is split between us in the unlikely event they do pull out!
- Fast, fixed and realistic timelines! The buyer must complete within 28 or 56 days (depending on auction strategy) meaning you can sell your house fast!
- National Auction Service! Our auction services are nationwide, so even if your property is outside of Leicester, we can make the magic happen! House in London, Manchester, Liverpool, Cornwall or Aberdeen? Give us a call, we’ve got you covered!
- Total Transparency! The sales process is quick, transparent and hassle-free; we do the legwork, get your property sold and take the stress out of your property sale.
Want to buy or sell at auction?
If you want to buy or sell at auction, give Harry Albert Lettings & Estates a call on 0116 321 4970 or visit our dedicated auction website to find out more or to ask us to add you to our mailing list of upcoming auction properties!