It is possible to save up to 40 per cent on the purchase price of a property by buying at auction. Given the current market conditions,
more and more repossessions are appearing at auction. Many of these properties are auctioned because they are in a poor state of repair and some have been stripped of fixtures and fittings. This can be off-putting for the ordinary buyer, but useful for property devel-opers as they can be obtained cheaply and provide a blank canvas for development projects.
However, it is also possible to make big mistakes and be lumbered with a property that is not a viable investment. To avoid these mistakes you must think carefully about buying at auction, and if you decide to follow this route you need to undertake careful and thorough research and make sure that you are not affected by
‘auction fever’. This is where bidders get carried away and bid more than they wanted to pay, or more than they can actually afford.
If you intend to buy at auction, you should take note of the following points:
I Think about how much you can afford and arrange finances before the auction takes place. If your bid is successful you will have to put down a 10 per cent cash deposit on the day, and you will usually have to complete the purchase within 28 days. Often this is not enough time to arrange a mortgage, so this will have to be sorted out before you make your purchase.
I View the property. Auction houses arrange open days, and these will be detailed in the salesroom catalogue.
I Consult the home information pack to check that the title deeds, type of ownership, covenants and other paperwork are in order and that the property is suitable for your development plans. Consult the Home Condition Report if it is included in the pack. If not, arrange your own independent survey to be carried out; this will have to take place before the auction.
I Consult a builder about the costs of renovating the property before the auction.
I Your solicitor or conveyancer may need to examine the legal documents prior to the auction, and you will have to pay for these services, regardless of whether you are successful in buying the property.
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I Find out whether there are any restrictions on development, either because of the area in which the property is located or as a result of restrictive covenants in the deeds of the property.
I Always set a price limit and don’t go over this limit at the auction.
I Try to view the whole room during bidding so that you can watch for phantom bids and check that the vendor is not bidding to raise the price on the property.
Once the gavel comes down and you are the highest bidder, it immediately becomes a binding contract and you cannot change your mind. Once you have bought at auction you cannot pull out or renegotiate a price if you find that there are major defects. On the plus side the property is yours and there is no chance of being gazumped. Also, buying a property at auction is a very quick process, and this can be useful for people who wish to begin their development project quickly.
To find out about property auctions contact local estate agents or search the various ‘property auction databases’ on the internet, although there is a fee for using these services.
Summary
If you are interested in buying a property, you need to check that it is being offered at the right price. You should always negotiate with the vendor to obtain the best price, and if the vendor is not willing to negotiate you should consider looking at other prop-erties. All successful property developers are good at negotiating and know how to obtain a bargain. Once you have made an offer, you may need to arrange for a survey and for someone to carry out the conveyancing. If buying at auction, you may need to arrange a survey and solicitor before the auction takes place.
Now that you have bought the right property, in the right place, at the right price and at the right time, you can begin your development project. The first action you need to take is to obtain all the required planning permission. These issues are discussed in the following chapter.
Useful addresses
Royal Institution of Chartered Surveyors RICS Contact Centre, Surveyor Court Westwood Way
Coventry CV4 8JE Tel: (0870) 333 1600 Fax: (020) 7334 3811
e-mail: [email protected] www.rics.org
The Royal Institution of Chartered Surveyors (RICS) is the largest organization for professionals working in property, land and construction worldwide. You can find a chartered surveyor in your area by using the online search facility.
Council for Licensed Conveyancers 16 Glebe Road
Chelmsford Essex CM1 1QG Tel: (01245) 349599 Fax: (01245) 341300
e-mail: use enquiry form on website www.conveyancer.co.uk
The Council for Licensed Conveyancers is the regulatory body for licensed conveyancers who are qualified specialists in property law. You can obtain the contact details of a conveyancer in your area by using the online directory.
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