In London, purchasing land or real estate can be pricey – with house prices rising at the fastest rate in 17 years. In order to purchase the land or property you need for a much lower price, it is a good idea to look at property auctions in London. Unbiased reports that in 2020, nearly 40% more property by value was sold at auction, compared to 2019. However, a home can be riskier to purchase at auction than it would typically be. An understanding of how real estate auctions operate and expert advice is therefore essential. Increasing your options and potentially getting a deal are two advantages of bidding at an auction. Buying an auction house might be less competitive than buying traditionally, but you’ll also be engaging with a different group of potential buyers who have possibly more experience in investing.
What do you need to know about auctions?
The likelihood of making a costly error increases when you buy at auction because you will probably know little about the properties up for bid. Most auction properties do not allow for an inspection of the home before the sale and this can serve as a major obstacle. The trade-off is that some properties can be sold at well below the market price making them a great deal. In most cases, the bargain is between information (a potential moral hazard) and the price of the property itself. To make a more informed choice and know if you are getting the better end of the deal or are being scammed, it will help to read up on the basics of real estate auctions or seek the help of a professional expert to have a complete understanding of how properties end up being auctioned and why finding and attending these auctions and how to go about a sale.
Advantages of buying a property at auction
The advantage of buying a house at an auction are the ease with which the sale goes through. Generally, the entire home-buying process is finished within a set time frame (typically a month) following the auction. The contracts are also signed as soon as the auction is completed. You will also be able to view all other bids in place making the experience much more transparent than a sealed bid. All these factors make the process of buying a home smoother and relatively more hassle-free.
Things to consider when buying at an auction
The main risks involved in buying a home through an auction, especially in London, is the problem of information (or lack of it), having financing ready in advance and getting too invested in the auction itself and overpaying for the property.
Firstly, some types of properties listed on the auction market may be inherently problematic which is probably why the sellers listed them there and not on the open market. Identifying and mitigating these problems is crucial and to get around it, it is advisable to hire a surveyor to do the checking for you.
Secondly, if the bid that you have placed is successful, then the deposit is usually due shortly after the auction. Therefore, you will need to have your finances in order, because the process is usually quick. Keep in mind that although auction properties may be less expensive than market value, upgrades and renovations are typically required. Moreover, if you back out of an auction after the bid has been placed and has gone through, you will lose some money.
Thirdly, it is usually easy to get carried away during the spirit of an auction because of its fast-paced nature. This may lead you to overpay and go over budget while making a bid – which is something you should be aware of. To determine what a reasonable price would be, do your research on the neighbourhood real estate market or have an easy way around hire experts who can do the market research for you.
After a decision has been made
After you have made the decision to buy at a property auction, the need for your hard work begins. You will need to do your homework, decide which property you want to buy, book a slot to view it, research the market value, decide on your budget, assess the neighbourhood etc. Before you attend the auction, consult a surveyor to ensure that your investment will pay off.
To bid at an auction, it helps to call in advance and reserve a seat at the auction after you are clear on the kind of property you want to bid on. Due to the high demand for real estate in London, many are already fully booked months in advance.
Buying a home at a property auction – to do or not to do? With professional help who can offer you expert advice in each step of the auction process, buying a house at the auction can be beneficial with high returns.