Why buy in auction?​

When it comes to properties available at auction, they typically fall into two categories:

a) “Normal” properties: These are houses that are perfectly fine, and the owners have chosen to sell them at auction for convenience. There is typically no cause for concern when buying such properties.

b) “Problem” properties: These properties are auctioned because they have some underlying issues that made it challenging to sell them on the open market. While these properties can present excellent opportunities for profit, they also come with potential risks.

Buying a “problem” property can be profitable if purchased at a suitable price and if you have the resources and willingness to address the issues. However, if you are unaware of the property’s problems or do not allocate sufficient time and funds to rectify them, it can turn into a disastrous investment.

The biggest risk when buying at auction is overpaying for a property due to undisclosed issues and then encountering difficulties in resolving those issues.

There are numerous issues that can affect a property, including structural problems, non-standard construction, short leases, Japanese knotweed, problematic tenants, fire or flood damage, roof issues, neighbouring property disputes, derelict houses, and more. The list is extensive, and new challenges can arise unexpectedly.

To minimise property-related risks when buying at auction, consider the following steps:

• View the property: Visit the property multiple times to thoroughly assess its condition. A second viewing may reveal details missed during the initial visit.
• Get a survey done: Engage a qualified surveyor to conduct a thorough inspection of the property. Though it may involve an investment, their expertise can uncover hidden issues and potentially save you from costly surprises.

Aside from property-related risks, there are other factors that can impact your auction experience if not adequately addressed beforehand:

• Insufficient information: Lack of information about the property’s structure or legal aspects can lead to misguided bids or unexpected complications after the purchase.
• Lack of preparation: Failing to have your financing in place before the auction can result in missed opportunities or challenges securing the property.
• Overpaying during the auction: The excitement and competitive nature of auctions can lead to impulsive bidding and overpaying for a property.

To tackle preparation-related risks, consider the following measures:

• Conduct thorough research: Gather as much information as possible about the property, including legal documentation, surveys, and any available reports. Understand the property’s market value and set a budget accordingly.
• Secure financing in advance: Obtain pre-approved financing or ensure you have sufficient funds available to cover the purchase. This allows you to bid confidently within your financial limits.
• Set a bidding strategy: Establish a maximum bid limit and stick to it during the auction. Avoid getting carried away by the competitive atmosphere and emotions.