House auctions provide a quick and easy way to buy and sell property. For many buyers and sellers, they can prove more appropriate and convenient than selling through a traditional estate agent. But how exactly do house auctions work? A good number of buyers and sellers have asked this question, so let’s shed some light.
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How do you buy a house at auction?
Buying a house at auction is a simple process, but it’s wise to carry out your due diligence. You may have to spend some money, but it’s definitely worth it as it can help you avoid making costly mistakes. Buying at auction involves five steps.
1. Find advertised or published auctions
Of course, you need to find an auction first. Look for regulated auction houses in the area that you want to buy property. Contact the auctioneers to find out their fees. Auction houses charge commission when properties are bought and sold, and they may also charge an entry fee.
Most auction houses release their housing catalogues to the public a few weeks ahead of the auction date. It is up to you, the buyer, to go through the catalogue and identify houses you would like to buy.
2. Read the legal pack
A seller’s solicitor may prepare legal documents that highlight the conditions of sale. These are attached to the catalogue of houses mentioned above. As a buyer, it is important to check the legal pack carefully.
If you’re new to buying this way and unsure how house auctions work, it may be wise to involve a solicitor to help you understand these documents.
3. Figure out how you will pay for the house
The sale of a house at auction happens fast. In most cases, you may be required to exchange contracts and complete your purchase within 28 days.
If you are buying a house with cash, you might not have much to worry about. However, if you intend to use a mortgage, you may require a mortgage agreement in principle (AIP). Yes, you can get a mortgage to buy at an auction. An AIP is a document from your mortgage lender stating that it is willing to lend you a particular amount of money.
4. Property survey
Contact the auction house and arrange to view the property. It’s also wise to appoint a surveyor for a professional inspection. This is a cost worth incurring as it helps you avoid purchasing a house that might have costly underlying problems.
5. Setting a price limit and bid
Setting a reasonable price limit might require considering how much similar houses in the same locality have recently sold for. Of course, you neither want to be outbid nor overpay.
Estimated house prices appear in the auction house catalogue to help you decide your budget. The guide price is the price to be listed in the catalogue, while the reserve price is the lowest price you are willing to sell your house.
Once your bid wins, you are required to pay a 10% deposit immediately after the auction ends. You then usually need to complete the purchase within 28 days.
Is it worth selling a house at auction?
It can be if your priority is a quick and easy sale. However, it is important to note that it’s possible your property will sell for less than its market value through an auction.
That said, if you are selling a property that is in need of significant refurbishment, you may achieve a better price at auction than you would by selling through an estate agent. An auction could also help you to sell a property that is considered difficult to value because of its condition, location or construction.
When selling at auction, it’s important to confirm that the catalogue listing for your property is correct before printing or publishing.
If you have any questions about how auctions work through a particular auction house, contact them directly to address your concerns. Selling at auction is a major commitment, so it’s worth doing everything you can to feel informed and confident about the process.
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