Investing in property through auction can be a fantastic way to purchase BMV properties (below market value), however you need to know the ins and outs to make sure this is a successful investment path for you. The last thing you want is to purchase the value for £50,000 below market value, but then need to spend that £50,000 on resolving devastating structural issues that you weren’t aware of. So, follow these four steps and do your due diligence before investing in property through auction.
Make Sure To Have Surveys Done
Firstly, and most importantly, it’s essential you have surveys done on the property. If you don’t have time to have surveys conducted, and you’re not a professional property investor, then avoid the property. It’s simply not worth the risk to go in blind. Having a survey before the auction will identify any potential structural issues like subsidence or damp, as well as any hidden issues that could cost a significant amount to resolve later down the line.
Have A Solicitor Review The Auction Pack
Next, you should have a solicitor review the auction pack. Each property being sold at auction will come with a legal pack, including all critical information you need to be aware of, including title deeds, local searches, planning permissions, any tenancy agreements and special conditions of sale. This won’t outline structural issues, which is why the surveys are essential.
An experienced conveyancing solicitor should review this pack to identify any concerns, including restrictive covenants, rights of way or outstanding debts that you may inherit with the purchase. Having a solicitor review the auction pack will mean you’re fully informed going into the auction.
Secure Financing & Set A Strict Budget
If you’re not buying the property outright, you need to secure financing prior to the purchase. This includes a 10% non-refundable deposit, typically paid immediately after the auction. The completion of the property will typically occur within 28 days of the auction as well, and securing a mortgage usually takes longer than this. So, make sure you have either an auction specific mortgage or a bridging loan ready so you can successfully complete the purchase.
It’s also vital that you set a strict budget. The excitement of the auction can be overwhelming, and the thought that just one more bid could be enough is a dangerous way to be. So, make sure you go in with a strict budget on what you can spend, also factoring in the cost of auction fees, solicitors fees, stamp duty, surveys and renovation costs that are separate to the purchase price. Auctions are good value until you end up getting carried away and overspending, so to make sure this is the beginning of a successful investment, stick to your budget.
Final Thoughts
Purchasing through an auction can be very rewarding and a great path, but being in control and knowing everything about the property is key to it being a success. Working with an experienced property investment agency like CityRise can be really beneficial, as they can source the below market value properties for you and support you through the entire process.