Buying property at auction can often produce a bargain purchase, but equally there are many pitfalls when buying in this manner. It is quite easy to make a disastrous mistake, so beware. Here are five top tips to consider when buying a property at auction.
1. Always go and see the property with your own eyes. It may seem so obvious, but you will be surprised how many people don't. If you don't inspect yourself, or appoint a qualified advisor to do so, how do you know the location is acceptable? If you don't go, you could end up buying a house situated under an electricity pylon, the property might look incredibly cheap on the glossy pages, but in those cases would it really be so? Don't be persuaded by fancy colour photographs in the auctioneer's catalogue, and his flowery descriptions. That's their job, to sell to unwary buyers. Always see the house with your own eyes, or hire a pair of reliable eyes to see it for you.
2. Prepare accurate costing. It is pointless buying a house for 100,000 that needs another 100,000 spending on it, if it will only be worth 170,000 after the work is completed. Work out actual costing carefully, and don't forget to include financial arrangement fees, lawyer's fees, and if you are planning to sell straight away, your selling costs too, such as Agent's fees and any loan repayments. Professional fees can quickly add up, and if your potential margin is a little skinny in the first place, you could find those fees eating your entire margin away, or even worse than that, you might even end up having to throw cash at your project to bring it to a successful conclusion. Accurate arithmetic is an essential. Never stray off your planned path.
3. Set a ceiling limit to your bidding, and NEVER bust it. In the heat of the moment, in the excitement and anticipation of the auction room, a room that can be packed with eager buyers orchestrated by an experienced enthusiastic auctioneer, it is very easy to become sucked into the excitement of the moment. It is very easy to be persuaded to pay more than you meant to. When the auctioneer says laughingly "come on, what's another 5,000?" Or "you're not going to miss it for a mere 5,000 are you?" Remember that this is your money he is talking about, coming out of your profit margin. As soon as you hear comments such as that, you should be reacquainting yourself with your absolute maximum figure.
4. Read the contract terms, read the auctioneer's terms. This is most important, for if you don't read all the small print, and what are you letting yourself in for? For example does the auctioneer charge a buyer's premium? What charges will they levy on you? What methods of payments will they accept? How much of the full cost of the house will they expect you to pay when the hammer falls? If you don't read all the small print, how will you know what you are agreeing to? The small print is there for a reason, and it is saying something. It is up to you to make sure that you know what that is. Remember, when the hammer falls, you are contracted to buy that property, come what may, and that includes all the terms and conditions that the auctioneer laid down beforehand. There is no turning back. If you don't know the terms, you are asking for trouble. Read the contract terms thoroughly, every time.
5. Get to the auction in good time. Find yourself a nice seat and listen carefully to the opening announcements. Just like the terms and conditions, these announcements might be important. You'll miss them if you arrive twenty minutes late, and you would only have yourself to blame. Pay attention to what is happening, and listen carefully. Don't worry about scratching your nose and buying a house by mistake. That doesn't happen. And before the time comes for you to get involved, decide how you are going to bid. You could raise your hand, you could catch the auctioneer's eye and nod aggressively, you could wave your card or program, but stick to one method. Auctioneers can become confused if one moment it's a nod, the next a nose scratch, or an ear pull!
Buying a property at auction can net you a bargain, but only provided you have done your homework beforehand. Don't allow yourself to be caught out on basic errors, and the chances are you will find it an exciting experience, and walk away with a bargain. Never worry if you miss a particular property, for there is always another one around the corner, and there is nothing worse than paying far too much just because you fell in love with it.