For many First Time Buyers, the idea of bidding against fully-fledged property investors in an auction environment will seem daunting. However, First Time Buyers are realising that purchasing a repossessed home at auction can save them about 30%, offering a more affordable way of getting on the property ladder. That is, if you’re prepared to put in the extra effort.
Here is some advice to help you get started.
Do your research
As a First Time Buyer taking your initial steps into the world of property auctions, the best thing you can do is arm yourself with as much knowledge as possible. Do plenty of research, and sign up to mailing lists of auction houses in the area you are looking to buy. Browse the internet for auctioneers’ web sites and download the legal packs of properties that catch your eye.
Ask people you know who have bought at auction. They will advise you on the process, and may give you some helpful tips on how to proceed.
It is also worth going to see the auction process at least once before you go there with the intention of buying a house. Buying a house at auction can feel intensely competitive, and it's easy to be swept up in the excitement! Going for a visit in advance will help you to feel more familiar with how it all works and less out of your depth.
Can I buy at auction with a mortgage?
Yes, you can buy at auction with a mortgage. If you need a mortgage, like most First Time Buyers, it is sensible to start arranging this as soon as possible, preferably before you find a potential purchase. Having a mortgage agreed ‘in principle’ will help you:
- Set your budget and know what auction property you can afford
- Bid with confidence knowing you have the funds to back you up
- Get things to move quickly when you do finally make the winning bid
Make sure you look for a mortgage deal where the lender can complete within 20 days, as this is a requirement of the auction process. You'll need to put down a 10% deposit for your property on the day, so be sure you can afford what you're bidding on, and that you have immediate access to the cash.
View the property and appoint a surveyor
If you see an auction property you are keen on purchasing, do visit it in person, preferably at various times of day, to make sure it really is right for you. This will also give you an opportunity to match it against the description given to you by the agents, to ensure it is how it appears. As a First Time Buyer you are probably aiming to live in this property, so if it needs a lot more work than advertised, that could affect your plans.
Hire a Chartered Surveyor to look at the property for you, who can alert you to any structural problems, and also give an independent opinion on how much the place is worth. This can help you decide what your maximum bid should be. If you're happy to buy a property that needs work doing to it then that's great, but you should adjust your budget accordingly. Which brings us on to our next point...
Be prepared for some DIY
When buying any property there may be things that you want to change, but repossessed properties at auction are more likely to need some restoration work to bring them back to top condition. However, on the bright side, any renovations you make will probably add value to your home. Your Chartered Surveyor will be able to advise you on whether there is a maximum price you are likely to get for the property, and you can budget your restoration work accordingly. Try and balance the saving you're getting at auction compared to how much time and money you'll spend making the property liveable - ensure that balance works for you.
Appoint a conveyancing solicitor
It is important for First Time Buyers to find a reliable property lawyer when buying a property at auction. Your conveyancing solicitor will be able to examine the legal pack to ensure that the property is not unmarketable and there aren't any problems which may cause issues when going on to sell the property later.
Some law firms specialise in speedy transactions, so make sure you tell your conveyancer that you are buying at auction so that they can tailor their service to suit your needs. Here at reallymoving we can provide up to 4 instant conveyancing quotes so you can compare prices in seconds.
Stick to your budget
When bidding at auction you may feel pressed to spend more than you intended, but remember: never bid beyond your means. Your budget is there for a reason, so don’t let your emotions get the better of you - work out how much you can afford and stick to your limit or you may not be able to afford to put down the 10% deposit you will need at the auction.
It is important to remember…
Not every property ends up at auction due to repossession. Sometimes homeowners decide to sell at auction so they can have a quick transaction. So do bear in mind that although it is possible to save money this way, not every auctioned property will automatically be a bargain. For First Time Buyers houses can seem like a great deal at auction, but it's important to make sure you can afford the property, and not to get carried away.
For more info, read our more detailed guide to purchasing property at auction
Updated March 2020