Buying a repossessed home at auction.

The number of repossessed homes becoming available at auction houses is growing and according to the Council of Mortgage Lenders is expected to reach 75,000 by the end of 2009. The banks are often keen to sell quickly, so they are setting low reserves which of course means that there are occasionally cheap properties to be snapped up.

If you are planning on purchasing a property at auction you need to ensure you have done adequate research and have the professionals lined up to move quickly and efficiently.

Make Enquiries.

Research the area around the property. Read the local papers and look online for crime, planning and schools reports. Make sure you know the area in which you are buying.

If you are planning to rent the property out, investigate the local rental market. Look at the rental agents’ windows to assess what is moving quickly and what the typical yields are. Factors such as local hospitals or universities can sway the price and ease of renting out. Some areas are already saturated with student lets as universities build their own campus accommodation, so don’t forget to look within the university campus.

Visit the auction house to witness the process

Before you launch into a bidding frenzy, visit the auction house to get a feel of the process and see how the system works. Study the catalogues to see what the reserves are, and compare with the eventual auctioned price.

Survey the property

Of course you should visit the property in person, but take a RICS surveyor with you. You can find a surveyor on reallymoving.com and get instant survey fee quotations here. Our surveyors will be able to give you an idea of any potential problems, of the value of similar properties in the area and prices for renovation work to be carried out. Remember that paying a professional for their advice could save you from making a very costly mistake. Don’t rely on your mortgage provider’s survey, as this is simply an indication to the mortgage company that they can recoup their losses in the same way as you are buying the auctioned property. Employ your own surveyor who is working directly for you and your interests.

Have a conveyancing solicitor ready

Ensure that the purchase is properly overseen by lining up a conveyancing solicitor to oversee the legal requirements. You can get an instant indication of solicitors’ fees here.

Before you attend the auction, have a set price in your mind

Do NOT get carried away and over-bid. Set a price before you walk through the door of the auction house, and stick with it. Ensure you are not carried away by another bidder who may just be very naive, so don’t let yourself be drawn in. Set your limit and stick with it.

Organise your mortgage

Great. You’ve won the auction. Now you are legally bound to purchase the property and you must exchange on the same day. You need to have that mortgage secured and ready to complete within 20 days. Call your solicitor as well as your mortgage company. If you do not have funds for the property, you will forfeit your deposit. At most auction houses, you will be expected to put down a deposit of 10% so remember your cheque book and two forms of identification.

Don’t forget to factor in the stamp duty costs. They can be found here.

For more information on repossessions, check out Martin Lewis's excellent site:  MoneySavingExpert.com