From doing your research to financial support, here’s everything you need to know if you’re starting out in property auctions.
Property auctions aren’t just exciting. They can also be extremely profitable, but only if you know how to take part in the most effective way. For first time attendees, this means doing your research, checking your finances, setting a budget and ensuring that a property auction is indeed the right course of action for you to take.
You also need to know exactly what to expect when you enter into a property auction, as the bidding itself can be overwhelming for beginners. You may need to do some research beforehand; click here to find an auctioneer service website that could be of some help to you. Besides that, we’ve put together this handy guide of what you need to know and what you need to ask before attending your first property auction.
In this article the experts at Glenhawk.com give their advice.
Be wary of the guide price
The first thing you need to know about property auctions is that the guide price you see initially can be extremely far removed from the final price the property ends up selling for.
Let’s take this account from MoneySavingExpert as an example. At their first property auction, the potential buyer had their eye on a three-bedroom period flat in Greater London. A large part of the appeal was the guide price, which was listed at a tempting 325,000 despite the fact that other properties on the street had sold for over half a million on Rightmove and Zoopla.
However, as the auction got underway, the same property was brought up and the bidding began at 350,000 – already 25,000 over the guide price. Eventually, a bidding war broke out between two other attendees and within minutes the flat had been sold.
The final selling price was 514,000, an increase of 58% on the original guide price.
This is not uncommon in property auctions, where setting a low guide price is a good way for auction houses to bring in new custom. As such, you need to make sure your budget is set at least 10% above the guide prices listed, and that you only consider properties which fall below this benchmark.
Questions to ask yourself
Understanding the difference between a property’s guide price and final price is important, but it’s only the first factor to consider when preparing for your first property auction. Here are some of the questions you should ask yourself before you throw yourself into the property auction experience.
“Is it right for me?”
You need to consider whether property auction is the best course of action for you to take at all. Property auctions are exciting and can be extremely profitable, but they are also risky and intense. Remember, as soon as that gavel hits, you’re in a legally binding contract, and failure to pay the 10% deposit can result in you being sued by the vendor.
Be sure in the fact that you’ve done your research and you know your budget. That way, you’ll feel much more prepared for the bidding experience.
“How do I find auction properties?”
The next step is finding auction properties. It’s always a good idea to sign up to auction house catalogues, as this will give you plenty of time to explore properties further before they actually go to auction. However, an alternative easy method is to simply search for auction properties via Rightmove.
“Is there any support available?”
Auction finance is an option for anyone in need of financial support leading up to a property auction. Traditional loan and mortgage schemes work in the long term, meaning it’s often difficult to meet the tight deadlines involved in the quick turnaround of auction properties. Auction finance is a short-term bridging loan specifically tailored to auction purchases, giving you time to find long-term finance solutions further down the line.