How to avoid common auction pitfalls
A quick guide to avoiding the biggest problems that arise at auction
In 2011, journalist Hannah Tims reported the unlucky story of one auction-property buyer in the Renfrewshire town of Gourock: Colin Todd.
Todd thought he had found a bargain: a Victorian property overlooking the Firth of Clyde, the largest and deepest coastal waters in the British Isles.
At auction, Todd successfully bid for the property. A week later, it did not exist.
The council tore it down.
After receiving a tipoff that the building might have structural problems, council inspectors deemed the property unsafe. And down it came, leaving Todd with the demolition bill and £37,000 to pay from the auction. He said: "I can't even pick up the key because there's no front door".
Todd's story is both memorable and dramatic. Not every story finishes this way, but the point is that there are plenty of issues you might come across when you buy a property at auction.
Let us take a look at some of the most frequent so that you can avoid them.
Common pitfalls, Quick fixes
If you have the opportunity to inspect a property before you buy, make the most of it. This gives you a chance to see what the state of the property is actually like. And if you can take any other experts along with you, you can gain their insight on the property too.
If you buy the property on the blind, you are much more likely to come across surprise costs. These can really add up. To bring surprises down, always inspect the property to take note of what improvements need to be made and then estimate how much this is going to cost. This gives you a more accurate representation of how much you are going to need to spend in total.
Do not take what you read in the auction catalogue as gospel. Even basic information, such as is the property freehold or leasehold, could be wrong. Do your own research and request a legal pack for any property you are considering a bid on. Get your solicitor to review the legal pack before the auction.
Previous credit history
Repossessed properties inevitably find their way into the auction catalogue. One pitfall to avoid in these cases is taking on the bad credit history of a previous occupant by mistake. Check with a credit reference agency, and if anything does show up later down the line do not worry, you can get the errors corrected.
If you have a big dream for the property then it would be a large mistake to assume that planning permission will definitely be granted. Check with a relevant authority from the council and discuss with them your plans for the building.
The exciting atmosphere in the auction room is part of the appeal of the day. But it is worth bearing in mind that excitement is often not connected to making the best decisions. Have a maximum bid in mind before you even enter the room in order to keep a level head.
If you buy a property at auction you are normally legally obliged to pay within 28 days or less. Failure to do so could mean you come up against a number of extra costs, such as interest and the seller’s legal costs.
Avoiding such costs can prove tricky for some, especially if the major banks will not provide a mortgage because the building is not mortgageable – it may have no bathroom or kitchen, or have structural issues.
But there is a way through. With an Affirmative bridging loan you can borrow between £10,000 and £5 million. The loan can be ready in hours and can be secured against an existing property and / or a property being purchased.
Call our Manchester office on 08000 44 84 84 for more information.