OK, when things are ‘normal’ and we are not under a lockdown… A question I am almost always asked by somebody who is just about to begin in property is ‘should I go to an auction to buy my first property?’
I guess that’s a natural question. We’ve all watched Homes Under the Hammer and it can give this idealised view of buying properties at auction and the subsequent refurb.
It even may seem glamorous. I don’t know that I’d agree it’s glamorous doing a refurb but perhaps that’s the motivation behind the question.
But my answer is always, and this might surprise you, an emphatic no! Do not start at auction! I have to say that slightly carefully because it could be that you find the best deal you are ever going to find at an auction and you don’t buy it because I’ve just said that. So, you have obviously got to come to your own view on this.
So why would I be leaning towards not buying at auction if you are a beginner? Because buying at auction is a very specialist thing and I think a lot of beginners don’t realise that there’s serious costs to incur before you even get to the auction room.
And if you are going to consider buying a property at auction, you also need to know what you are buying, and that can take a lot of research, as well as upfront expenditure.
There are reasons why properties go into auctions and why they aren’t sold through estate agents. Sometimes the properties are absolutely fine, but it could be there is some sort of title defect, that means there is some kind of legal problem with the property.
Or it could be that there is some kind of structural issue with the property and it could be that you don’t know. If there is a serious problem, it could lose you a lot of money. In order to check the property out, in order to be clear as to what it is you are actually buying you need to get experts involved.
For example, first and foremost you are going to need a survey (I’ve got to say that I’m an ex-surveyor) and it would be the logical, reasonable thing to do if you are buying a property to get a surveyor to check it for you.
If you are going to have the title checked out, and you always should by the way, most auction companies will make the legal pack available online nowadays so you will be able to download that. You should get a solicitor to check it for you because they will know what they are looking for, they will know all the subtleties of the wording in the title, in the deeds, in the covenants, in the planning, whatever it happens to be that needs to be checked out.
If you need finance and you’re not buying for cash then you will have to have the finance arranged before you go to the auction. That means talking to a broker and probably paying a broker’s fee, getting a valuation, and arranging finance from a bank or a bridger.
All of this costs money and adds up. You could easily spend £2,000, or more, depending on what the property is and how much its worth, before you get to the auction.
I’ve had the experience of going to an auction and not even being able to bid, because so many people were interested in the property that I didn’t even get a chance to bid. The bidding went past the maximum price I would’ve paid before I’d even had a chance to put my hand up and bid. So, I could’ve spent £2,000 and not even bid. That is one of the dangers of auctions.
So, if you are a beginner, I would say no, it’s not the place to buy your first property, unless you are willing to get help and to be prepared to pay for help, but knowing that you might not be successful.
Having said that, there is a way to buy at auction which could work, and perhaps we will look at that in a future article.
Peter Jones B.Sc FRICS
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