Unlock the door to investment opportunities at auction with these six key questions and answers from the experts at Belvoir…
1. Big benefits
‘What are the potential benefits of buying at auction?’
Expert answer: “One of the main benefits for investors buying at auction is that they can often pick up a property below market value,” says owner of Belvoir Melton Mowbray and Belvoir Bingham Charlotte Baker. “Not everyone will be a financial position to be able to purchase at auction and therefore there will be less competition, plus auctions are often a good place to pick up a repossession.
“Another benefit is that buying at auction makes the process of gaining possession of the property very quick,” she continues. “In fact, transactions are often completed within a few weeks.”
2. Possible pitfalls
‘What are the possible pitfalls?’
Expert answer: “In the excitement of an auction it’s easy to get carried away and bid more than originally intended,” says Charlotte.
“Another issue is that you don’t always know what you’re buying and some vendors do see auctions as an opportunity to off-load problematic properties. Of course, not all auction properties are problem properties but some may have ongoing issues which may be difficult to detect during the speed of the process.”
3. Before you go
‘What should I do before the big day?’
Expert answer: “Before the auction it is vital that you visit the property you are interested in for a viewing,” says Charlotte. “It is advisable to do the same level of research as you would if you were buying through a high street estate agent. A property can look great on paper but have unfavourable features or be in an undesirable location which will only be discovered when you visit it in person.
“It’s also wise to pre-plan your strategy, have a clear shortlist of properties you’re interested in and understand exactly what you’re happy to spend. In order to observe the process before the big day it may also be useful to visit other auctions too.
“It’s important to find out what properties usually sell for in that location. If you don’t know what the market value is for that particular street then you can’t possibly know what’s below it!
“Additionally, it’s essential to make sure you have your finances in place and you are in a position to proceed. You need to know what you can comfortably afford (including any renovation and trouble-shooting costs) before you place a bid… once the hammer goes down you are committed.”
4. On the day
‘What should I do (and definitely not do!) on the day itself?’
Expert answer: “One of the most important things to remember on auction day is to keep calm,” says co-owner of Belvoir Ipswich Jenna Bryenton.
“By the time the auction comes around you should know what your budget is, have finances finalised and understand what you want the outcome to be. Therefore the main rules on the day itself are just to keep calm, stick to your budget and not overbid or appear too eager. It’s important to be on time too, plus of course to stay silent in the auction room while other bidding is taking place.
“Also, don’t be afraid of leaving the auction empty-handed. You may have a shortlist of properties you are interested in but, if these all go to higher bidders, it’s not advisable to ‘panic buy’ a different property which you haven’t visited or researched prior to the auction. Always do your homework in advance and never be swayed towards a property just by the brochure.”
5. Where and when
‘How can I find out when and where an auction will take place?’
Expert answer: “If you’re looking for a property in a specific location, find out where the auction houses are in that area and enquire about sale dates,” says Jenna.
“If you’re searching nationally, Rightmove and Zoopla are good places to start as they usually advertise properties that are being sold at larger auctions.
“Also, your local letting or estate agent will often know of auction dates that are coming up in the near future.”
6. Finding out more
‘Where can I get further help and advice?’
Expert answer: “Your local letting agent can be an invaluable source of information for anyone new to buying at auction,” says Charlotte. “They will be able to educate you on how the process works, plus help identify those properties which will make good investments, advising on the likely demand, potential rental return and updates needed to make it market ready.”
Most agents will be happy to visit the property before the auction and some will even attend the auction with you too.
“At Belvoir Ipswich we often go along to the auction with our investors or attend on their behalf,” says Jenna. “It’s useful to have us there so we can impartially assess what’s happening in the room, be on hand for last-minute advice, plus help apply the breaks if we can see overbidding occurring in the excitement!”
Top tips… at a glance
- Always research the local rental market and its potential before bidding
- Set a realistic budget (including any renovation costs) – and stick to it!
- Make sure you view the property before the auction date. Look out for hidden issues while doing so – there may be a reason the vendors are choosing to sell at auction
- Stay calm during the auction and don’t get emotionally involved
- Don’t overbid in the excitement
- Observe proceedings at other auctions prior to the big day
- Arrive early – having time to get a good position and assess who will be competing against you is advisable
- Local auctions are a great place to start but think about national auctions too
- Arrange your finances so they are in place before the auction and you are in a position to proceed
- Never ‘panic buy’ a different property which you haven’t thoroughly researched or viewed because the one you wanted went to a higher bidder
- Don’t potentially push up the price by bidding too early or bidding in overly large increments
- Do consider repossessions and renovation projects – but check the sums add up before committing
- Ask an agent about possible ‘rental returns’ for the property you have chosen, plus its suitability for the rental market
Article Courtesy of: Belvoir