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Are you a UK property investor looking to buy an auction property? If so, you’ve come to the right place. Buying auction property can provide you with unique advantages, such as competitive pricing, a streamlined purchase process, and the chance to secure properties that may not be available through traditional channels. However, entering the auction deals uk as a beginner can be overwhelming without proper knowledge and preparation. In this comprehensive guide, we will walk you through the essential steps and key considerations to help you navigate the process of buying auction property with confidence.
6 Steps to Property Auction Success
Step 1: Research Upcoming Property Auctions
Embarking on auctions to secure property without sufficient research can lead to disaster. Your first step should be to identify reputable auction houses in your preferred location. Start by searching auction websites uk; by exploring their track record, reputation, and terms and conditions, you’ll know who to trust. Next, look for their upcoming property auctions. Utilise auction catalogues which provide a wealth of information on properties for sale, including legal details and estimated costs. From there, narrow down properties that align with your investment needs. Ensure the conditions of the property are favourable by employing professionals such as surveyors and solicitors. Trust us – attention to detail is critical when investing in property at auctions.
Step 2: Set a Budget for your Auction Property
Creating a budget is vital to avoid financial stress when purchasing property. Calculate your top buying price by considering market value, potential renovation expenses, and anticipated gains. Don’t forget to include all possible expenses, such as auction fees, legal fees, stamp duty land tax, surveys, and repair or renovation expenses. Investigate financing possibilities, such as cash reserves, mortgages, or bridging loans, and ensure that you have sufficient funds available before participating in auctions.
Step 3: Attend the Auction
Attending the auction itself can be an exhilarating experience. Register with the auction house beforehand to obtain a bidding number. Familiarise yourself with the auctioneer’s conditions of sale, including bidding increments, payment terms, and any special rules for each property. Set your bidding limit and manage your emotions to avoid overpaying. If attending in person makes you uncomfortable, consider proxy or telephone bidding services.
Step 4: Win the Bid
Wow, you won the bid! It’s time to move forward with the purchase. To secure the property, you’ll need to provide a required deposit, typically 10% of the purchase price. Your solicitor will take care of all legal proceedings, including exchanging contracts and completing necessary paperwork. Before finalising the purchase, ensure all necessary legal checks are conducted, such as title and relevant searches. Work with the seller to agree on a completion date and ensure you have enough funds available to close the deal. Congratulations on your upcoming property purchase!
Step 5: Renovate
Ready to flip your auction property? Follow these essential steps for renovation success:
- Collaborate with qualified professionals like architects and contractors to develop a thorough renovation plan. Be sure to include a detailed schedule of work with timelines and budget considerations. Allocate funds for renovation costs, such as materials, labour, and contingency funds. Don’t overlook critical expenses that could impact your project’s ultimate success.
- Acquire all necessary permits and approvals before beginning any work to avoid potential setbacks or complications.
- Revisit your schedule of work as the renovation progresses and adapt your budget and timeline where necessary.
By following these straightforward steps, your property renovation will be well-planned and executed, resulting in a successful outcome that meets your goals.
Step 6: Resell or Refinance
Even if your original plan was a property flip Once the property is renovated, consult with local estate agents to determine whether selling it for a profit or renting it out for a steady income stream is the best option. If you choose to keep the property for rental, you can still release useful funds by refinancing your property to fund your next project.
What Property Auction Mistakes Should You Avoid?
Do not bid blind!
You may think that you’ve spotted a bargain on auction day and be tempted to snap it up, but this is an extremely high-risk strategy. Due diligence is crucial, especially since problem properties often make their way to auctions. Once the hammer falls and you’ve won, you’re in it for the long haul and could be responsible for a minimum of 10% of the purchase price, even if you discover hidden nasties like structural problems that turn your profits into losses or prevent you getting finance for your purchase.
Don’t trust the pictures
Would you buy a car without buying it first? If not, why on earth would you buy something of much bigger value like a house?
Viewing the property in real life can prevent a myriad of property pitfalls. Signs of damp and mould are much easier to identify by eye and you can get a much better idea of the area and whether there are nightmare neighbours, noise pollution or funky smells that you need to find the source of.
Don’t skimp on the survey
It is a common misconception that you cannot have surveys completed on auction properties. To clarify: you can! As UK property auctions are full of properties that need quick or cash sales, it stands to reason that they have more than average numbers of properties with issues that prevent many financing options. To prevent costly surprises and avoid paying over the odds, make sure to have a professional survey done.
Avoid going over budget
Auctions are a thrilling experience and it’s easy to get carried away and pay more than you planned. Bear in mind that anything more that you pay cuts into your profit margins.
Don’t forget to get legal advice!
Do you know what’s included in an auction legal pack? It contains important information about the property such as searches, as well as details about the auction process and some special conditions. And the best part? It’s available to every buyer before the auction and can easily be downloaded online.
Unlike when buying through an estate agent, due diligence comes first in an auction. The legal pack is provided by the seller’s solicitor and it’s up to the buyers to review it and do their own due diligence before bidding. This way, you can avoid any nasty surprises and end up with a legally binding sale.
But why should you bother reviewing the legal pack? A property isn’t just about the bricks and mortar, there are also numerous legal issues that can arise such as ownership, lease, easements, and covenants. That’s why it’s crucial to have a professional review the legal pack for you to ensure you don’t miss anything and make an informed decision.
Don’t let an issue in the legal pack slip past you- get a pre-auction report from a solicitor, and you’ll be able to flush out any potential issues and purchase your dream property with confidence.
Buying auction property can be an excellent opportunity for UK property investors. With thorough research, a well-defined budget, careful bidding strategies, and proper due diligence, you can successfully navigate the auction process as a beginner. Remember to stay informed about upcoming property auctions, explore online auction opportunities, and browse auction catalogues to find the best deals. If you’re looking to enhance your property investment skills further, consider attending one of Touchstone Education’s property investment courses, such as Your First Auction Deal or to build your base knowledge of a range of strategies, sign up for the UK’s leading 2-day property investment course: Wealth Through Property.
Alternatively, make the first steps on your property journey, claim your free Wealth Through Property e-book.
Remember, with the right knowledge and preparation, auction properties can be a rewarding investment avenue. Happy bidding and investing!
