Buying and selling investment properties at auction
Buying and selling properties at auction isn’t for the fainthearted but it’s a fast way to do a deal.
If you’re new to the process of transacting property deals at an auction, here are some pointers to help you decide if it’s a route you want to take.
What sort of properties for investors do people sell at auction?
All types of property can be sold via an auction. However, they’re often used by people trying to sell homes in need of renovation, or unusual properties that are difficult to value.
Auctions are popular with developers and builders in search of properties that need refurbishing or complete modernisation. Buyers looking for a property project are likely to frequent auctions.
The seller will probably set a realistic reserve price, and then bidders will put in their offers based on their opinion of the property’s value.
How does the auction process work?
Usually the auction house will market your property in the weeks before the auction to bring it to the attention of the right type of buyer. You may also decide to publicise it yourself through social media or other means.
You set the reserve price; the lowest amount you’re willing to accept. If bids are below the reserve price, the auctioneer can withdraw the property from sale. You can also set a guide price, which will generally be less than what the property eventually sells for. However, a guide price will give potential buyers an idea of what the property is worth.
Once the auction begins, you’re legally committed to selling the property to the bidder who makes the highest offer. You then receive 10% of the cost of the property before the buyer leaves the auction with the balance to be paid in full within 20 days.
Selling at auction is a fast process, and you must be clear about what you’re doing before you decide to sell your property this way.
What is the cost of selling a property at auction?
You’ll typically pay the auction house around 2.5% of the price you receive for the purchase of your property. You may also incur advertising costs, if you’ve agreed this, and they may apply even if your property doesn’t sell.
Once a sale has been agreed, you’ll also have to factor in solicitor’s fees.
What are the benefits of selling a property at auction?
Speed is one of the main advantages of selling at auction.
If you want to free up cash quickly, then this is one way of doing it. A common reason for properties to end up being auctioned is because of bankruptcy or repossession.
Another reason to choose to sell at an auction is to find different types of property investors. Sellers with a property that could be difficult to sell via an estate agency to a straightforward buyer will often turn to auctions to find alternative kinds of investors.
What are the benefits of buying an investment property at auction?
For property investors, auctions can be a great place to snap up a bargain. Sellers wanting to offload their properties quickly will often take a lower price to achieve a fast transaction.
But as a buyer, ensure you’re in a position to pay up promptly. If you’re relying on a mortgage, make sure this is in place before you make a bid as you’re going to be legally obliged to complete on the sale in about three weeks.
Where is the nearest auction house near me?
Before you consider buying or selling an investment property at auction, we advise attending an auction or two, so you can get first-hand experience and understand the process a little better.
To find your local auction house, take a look at the Auction House website. on here, you’ll also find some useful information about buying and selling at auctions.
Would you like to learn more about property investing in Berkshire, Hampshire or Surrey?
HMO on Steroids is proud to work with a range of partners and preferred service providers. We often advise our property investors to go to training classes. And in our 20+ years’ experience in property, we’ve never come across an investment training provider like Property Mastery Academy!
Discover their Introduction to Property Investing training course on their website: An Introduction to Property Investing
Their Introduction to Property Investing training course will help you understand the different property investment strategies that you can use in today’s property market.
If you’re ready to begin investing in property and generate serious returns, we’d love to meet with you for a coffee and discuss your plans and see how HMO on Steroids could fit into those plans.