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Martin's Blog 30/05/11 - When the Gavel Falls
Ever fancied buying your next home at an auction? If so, you’d be one of a growing number of ‘auction novices’ who’ve ventured into the auction rooms to buy property. Buying in this way is exciting and rewarding - not least because once the gavel falls, you know you’ve got the house - no gazumping and to-ing and fro-ing between the vendor. Auction rooms are also great places to find property bargains, but you need to have your wits about you.
1. Don’t Buy Before You’ve Sold - If you’re selling one property to buy another, don't bid until you've sold yours and completion is set. Otherwise you might have to complete on your auction purchase without the proceeds of your sale. Bridging Finance can help but its expensive.
2. Limit Yourself - Set yourself a maximum price limit on the property and stick to it. It’s easy to get carried away at the auction. Discipline yourself to only bid up to your maximum. To calculate this, work backwards from the estimated end value, having factored in any renovation costs, finance and legal costs as well as payment for your time if there’s work to be done.
3. Survey the Property - Make sure you get a valuation or survey carried out before you go to the auction. At the very least visit the property with someone who knows what they are doing and can spot potential problems. This way you’ll know what issues the property might have.
4. Visit Auctions - If you are new to buying at auction, attend a few as an observer so that you can get a feel for them and the way they work. Then when you actually go along to bid it won’t seem so daunting.
5. Read the Legal Pack - Get the Legal Pack in advance and read it. Discuss the contents with your solicitor. In particular, make sure he/she checks the Title Deeds, any special conditions of sale, covenants or restrictions in place that could impact your use. Check if planning permission has been granted and if so, when.
6. Never Buy Blind - Always view the auction property thoroughly before placing a bid. It’s a good idea to visit the property during different times of the day or week. A seemingly quiet, pleasant spot might be subject to loud noises, disturbances or unpleasant smells at certain times.
7. Get Ya Cash Sorted - If you are the successful bidder, you normally pay the deposit (usually 10%) there and then on the day and completion takes place 28 days later. You must have the money needed to complete the sale already lined up. If you need a mortgage, get this agreed first. Bear in mind that some auction properties are in very poor condition and might not be mortgageable.
8. Don’t Bid Yourself - If you really are nervous about the auction process or don’t trust yourself not to go over your maximum price. Get someone else to do the bidding for you. You can either attend or stay at home. Either way, you need to give your bidder clear instructions on your maximum price. If you are unable to attend in person, you may be able to bid by telephone. Ask the Auction company about the process for doing this.
9. Bid with confidence - up to your limit. Don’t jump in with a bid too early - let other bidders have their go first. When you feel the bidding is petering out, that’s the time to put your hand up and bid.
10. Don’t get hell bent - if the property you wanted fetched more than your agreed maximum price. There will be other houses just as good if not better - and at the right price. There’s plenty of auctions and properties out there.
Guide price - What the auction
company thinks is a sensible price for the property. Be aware that guide prices
can be set deliberately low to attract more interest and the bidding can go far
higher than it.
Reserve price - A minimum price that the vendor is
willing to sell for. The auctioneer will know the Reserve price and if the bidding
doesn’t reach this level, he may stop the auction with the property unsold.
Bids off the Wall - Is a tactic employed by auctioneers to
entice more people into the bidding. It is a legitimate practice where the
auctioneer pretends that someone has bid and can help kick start bidding. He
can’t do this once the reserve price has been reached.
‘In the Room to Sell’ - if the auctioneer says this during the
bidding, its a sign that the property has reached its reserve price.
‘Going once…’ - As bidding slows down, the auctioneer will say ‘Going Once…Going Twice…to say that he is about to end the bidding. If you’ve not bid by now - get on with it! Eventually, the auctioneer will say ‘Going for a third and final time’ when he’ll bring the gavel down.
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