Purchasing a property at auction is not right for all. It is important to ensure that these auctions are the perfect fit before you enter into it. You have to understand you reasons for buying at auction and know what you are getting into.
The purchase can be both financially beneficial and exciting. You can stay away from the lengthy buying procedures that are usually unavoidable if you buy a property through private treaty. Also, you can expect things no to fall through at the last minute in this option. Thus, you have to be totally ready and make sure that you do enough research before you try to buy a property.
Establishing your Budget
- Finances– To purchase at auction, you have to give 10 percent of the purchase price right away when the bid has been accepted. As you establish a budget, make sure that such funds are available when needed. The funds’ remainder will have to be available at the set completion date, usually 20 to 30 days following the auction. If you are using a mortgage to buy a property, do not bid at an auction in case you haven’t got the mortgage offer. As you approach a mortgage lender, inform them that you are planning to purchase at an auction and have an Agreement in Principle before you begin your home search.
- Guide Price– While a property is likely to have a guide price, this may not mean the property will sell at such price while the vendor’s reserve is invariably higher with a lower guide price for conjuring up interest. The rule of thumb is that properties are expected to sell for between 10% and 30% above the guide price, though there are times when a house sells for more than double its guide. You have to calculate your budget based upon realistic numbers instead of making use of an auction catalogue guide price.
Searching for the Right Property
- Location- Just like any property purchase, buying at auction begins with determining the location you want to look in. As real estate auctions tend to be held at various places, it is possible for you to broaden your search to find the perfect property. In order to find the most recent property auction action, consider using auction catalogues online detailing every property together with a guide price and photos.
- Size- if you wish to buy a property to stay in by yourself, you should have considered size already. If you plan to rent the property out, think about the market you want to attract. Carry out important research on the kind of rental homes an area has so you will know the kind of property that would work within your means.
- Type of Property– Leasehold/Freehold- As you buy a property, normally you will get the freehold. Thus, you own the property and land outright. Leasehold means you own the house for a specific number of years based on what the lease specifies. Remember that a short-term lease may give you difficulty getting a mortgage. The property’s actual owner is the company or person who owns the freehold. Usually, you will have to pay a ground rent to the freeholder. This fee is the rent for the land the property sits on.