House auctions provide the perfect opportunity to get a buy-to-let property for sale, at an appealing price. However, the financial aspect of auctions can put investors off, as property auction purchases differ from buying via an estate agent.
It’s easy to resolve any financial concerns you might have, simply by understanding how the process of buying a house at auction works. If you’re not sure, here’s a brief guide to help you.
You’ll Need to Have the Funds to Hand
The first and most important thing to be aware of is, if your bid is successful, you’ll be required to pay 10% of the final sale price on the day. This is in addition to any fees that the auction house might charge.
The remaining 90% needs to be paid in full within 28 days. Be warned, if you fail to pay the full amount within the stipulated time, you may lose your initial deposit. So, as you can probably gather, it’s vital to have your finances in place before you start bidding – or run the risk of losing serious money. Mortgage lenders are usually happy to agree mortgages in principle for properties purchased at auction, but it’s important to check beforehand. Getting a bridging loan is another popular option; however, you need to be 100% confident that you can pay it back in time, as interest rates are usually high, and the loan is often secured against your personal assets (e.g. your home).
The Importance of Insurance
Be aware, as soon as the gavel lands, the property is legally yours. That means, if anything happens to it from that moment on, it’s your responsibility. Any damage to the property (e.g. by fire or flood) is highly unlikely so soon after the property auction, but it has been known to happen, so it’s imperative to arrange your insurance as soon as possible.
Paying When Bidding Online
Sometimes, investors get confused by the online bidding process when remotely taking part in a property auction. Usually, you’ll be required to register with the auction house prior to the auction, so it’s important to do so in advance, to avoid panic on the day.
The normal protocol is to send the auctioneer a cheque for 10% of the maximum amount you’re willing to bid. This can be off-putting, but the major advantage is that it ensures you don’t accidentally bid more than you can afford.
Bidding at a House Auction – Taking Precautions
Property auctions are often exciting – and as such, it’s easy to get carried away by it all. Remember, buying a house at auction is a serious business, and should be treated as such. If you bid over the odds, you run the risk of being saddled with a property that won’t generate much ROI. When attending a house auction, make sure you do the following:
The Buy2Let Shop Limited
The Buy2Let Shop are a team of expert property investment agents in London, and we’re here to assist with buying a house at auction. We also have a wide variety of properties on our books, all priced competitively to sell, which aren’t available to the general public. For more information, visit The Buy2Let Shop website today.