The 5 essential steps you need to take before buying at a property auction

There are plenty of reasons why you may be thinking about buying through a property auction, whether you want it to be your home or an investment. If you’re new to auctions, read on to discover the essential things you need to know, including how a bridging loan works.

Every year thousands of properties are sold at auction. They could represent a unique opportunity to purchase a home at a competitive price or find the right property to develop to make a profit.

Before you start bidding at an auction, here are some of the things you need to do.

1. Check the guide price

The guide price is the figure that the auction house or seller believes the property is worth. It can give you an idea of how much it’ll sell for. Of course, there’s no guarantee that the property will sell for this amount – it could be higher or lower.

It can be easy to get carried away when you’re bidding, so have a clear budget in mind and don’t exceed it.

Sometimes, you will see a reserve price too. This is the minimum price that a seller is willing to accept, but it isn’t always shared with prospective buyers.

2. Try to view the properties you’re interested in

It can be more difficult to book a viewing if you want to buy at auction.

An auction house will often list properties at least a month in advance. However, in some cases, you could have just a matter of weeks. While you may have easy access to photographs, floor plans, and more, it can be hard to get an accurate overview of a house without seeing it in person.

Many auction houses will arrange viewings at fixed times so anyone interested in buying can access the property.

3. Arrange your mortgage early

If you’ll be using a mortgage to buy the property, start the process early – you’ll normally have to exchange contracts within a set number of days. Delays could mean you miss out on the property.

Apply for a mortgage in principle and have all your paperwork, like proof of your income, organised well in advance of the auction if possible.

We can help you arrange a mortgage in principle and make the mortgage application process smoother. Please contact us if you have any questions.

4. Read the legal documents carefully

Usually, a legal pack will be available ahead of the auction. This will include a range of documents, such as the conditions of sale and the results of property searches. Read the information carefully and make sure you’re happy with everything before the auction day.

You may also want your solicitor to review the documents for extra peace of mind.

5. Organise a property survey

You can get a property survey done before the auction. While this will cost you, it can give you confidence about the property and ensure you understand potential issues. If you’re looking to buy a fixer-upper, this step is even more important.

Bridging loans could provide short-term finance when you buy at auction

As the name suggests, a bridging loan is a form of short-term financing to bridge a gap.

When you’re buying property, they could be useful in a variety of scenarios. For example, a traditional mortgage can take months to organise. In contrast, a bridging loan could give you access to the cash you need in a matter of days. Or you may want to buy a property at auction before your current home has sold.

When you’re facing time constraints, a bridging loan could mean you don’t lose the property.

However, a bridging loan will often need to be secured against something, such as another property. If you cannot repay the loan, you risk losing the asset it’s secured against.

When applying for a bridging loan, you’ll need to show a repayment strategy, such as using a mortgage or equity from a property sale. It’s also a good idea to have a backup plan in place – otherwise, you could lose the property and other assets.

Another downside is that you will need to pay fees, which you may be able to roll up and pay as a lump sum with the initial loan. Typically, these fees are much higher than a traditional mortgage.

So, while a bridging loan could be a useful way to access money rapidly if you want to purchase a property at auction, there are costs and risks you must weigh up first.

Get in touch to talk about your mortgage

We can help you identify a mortgage that suits your needs. We’ll also be on hand throughout the process to minimise delays – it could reduce the cost of a bridging loan and the risk of losing the property. Please get in touch to discuss your mortgage.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Think carefully before securing other debts against your home.