Buying a repossessed home at auction can provide potential buyers with a quick purchase and a means for investment. Buying at auction comes with both risks and high pay offs, especially in today’s difficult property market. Repossessed homes can often go for extremely low prices as the banks or property owners are losing out on money whilst the property remains empty. However, not every repossessed home that comes up at auction is a bargain, despite the low prices. These top tips are your essential guide to sensibly buying yourself a repossessed home at an auction.
Planning to Buy a Home at Auction
Get used to how the auction house works. We recommend visiting your local auction house a few times before actually buying so that you can get used to how it all works and get the feel of such a competitive environment. Doing this will leave you feeling prepared when it comes to bidding for a repossessed home of your own. Homes that are up for auction are available to view in the auction house catalogue weeks before the auction date. Use the catalogue to research homes and prices and to select the properties that you are interested in buying.
Visit any properties that you are interested in buying at auction with a surveyor or solicitor. This sensible tip will help spot any hidden damages or defects with the house and provide a much clearer overall picture. Arrange visits to the property with independent surveyors and conveyancing solicitors. Some mortgage lenders do provide a free surveyor, however this may come with a higher mortgage cost. Use these visits to draw up your action plan if you wish to renovate the property or factor in any work that may need doing.
Organise your finances with your mortgage provider. Before bidding at auction it is important you arrange with your mortgage lender a principle agreement. This will inform you of how much money you can actually borrow and that the properties you wish to bid on meet your lender’s criteria. You will have your mortgage ready to go for when you start bidding. This is called a decision in principle (a DIP).
Buying a Home at Auction
Notice of Offer. When your winning bid on the property has been accepted, the estate agent or bank may then place a ‘notice of offer’ in the newspaper. They are legally obliged to invite other bidders to view the property and offer a higher bid. A notice of offer gives other buyers seven days to place a higher offer. It can take up to 28 days to confirm a bid and other offers can still be taken into consideration at any point up until this day. It is important that you take this into account when you budget your costs for surveyors and solicitors as this could still end up being wasted money right up until the very last day.
Budget for any after costs. Repossessed homes are not always looked after properties. Make sure you include the costs of repairs when you set your budget and estimate repair times too. Repossessed homes can often have high repair costs, however it is possible to grab a bargain. Service re-connections can also increase the amount of additional costs and can sometimes be forgotten about when budgeting. Visiting the property before bidding will really pay off at this point as you’ll hopefully have included these details in your action plan before bidding.
The correct way to handle previous tenants. With repossessed homes you can often continue to receive demands and, in some cases, bailiffs. Opening post addressed to someone else is illegal. The best way to deal with this is to write ‘no longer at this address’ or ‘addressee unknown’ and return to sender. It is important to remember that debt from previous tenants is not attached to the property and will not affect your own credit as the new owner.