Three common mistakes when buying property at auctions
It is possible to purchase a property at auction at bargain prices, but there are three common mistakes to avoid:
1. Failing to secure the finance to buy property
Some people go to an auction with an agreed amount that a mainstream lender has offered to provide on a mortgage. They presume that if they win a bid for property valued at the mortgage offer amount or less, it is fine. Most auctions require full payment for the property within 28 days of the auction. Many mortgage providers cannot provide the necessary finds within that period.
If the property is cheap it may need refurbishing, and a mortgage offer may be conditional on finishing the necessary building work.
If you have arranged a mortgage offer through a broker, they should also be able to organise a short-term bridging loan that can be used until mortgage funds are available, or until refurbishment work is completed.
2. Sticking rigidly to guide prices
Bidding over the guide prices can be acceptable provided that you have researched what similar properties have sold for in the area, and do not bid significantly above this value.
3. Not reading the legal pack for the property
This will outline what you can and cannot do with the property. For example, you may not be able to change the use of the property, from commercial use to residential, or make other changes that might transform the property into something more sellable or rentable.