A repossessed property is a home that’s been seized by the lender because the owner failed to pay the mortgage. The property is then sold to recoup the lender’s money. The lender usually wants to sell quickly which means you could get a bargain.
Purchasing a property through an auction is not for the faint-hearted. Your purchase is binding as soon as the gavel slams on your bid and includes all the benefits, and drawbacks, that come along with it. Before even considering buying at auction, it’s crucial to know what you’re getting into. Here’s a helpful guide to help you
Do your research
It’s best you arm yourself with as much knowledge as possible, especially if you’re buying for the first time. Get a hold of the latest catalogues of auction houses in the area you are looking to buy. This way, you’ll always have the latest properties and information at your fingertips. Browse the internet for auction web sites and download the legal packs of properties you like and get the pack for any properties that you are interested in checked by an experienced property Lawyer.
If you’ve never been to an auction before, it’s worth going to one and seeing the whole process at least once before you go there with the intention of buying a house. The competitiveness and the excitement of the auction can easily sweep you up and going for a visit in advance can help you feel more familiar with how everything works.
Can I use a mortgage?
You can purchase a property at an auction using a mortgage. It’s better to start arranging your mortgage before you start searching for a property of your liking. This will help you:
- Determine what auction property you can afford
- Bidding with confidence as you’ll have the funds to back you up
- Getting things to move quicker when you make the winning bid
If your bid is successful you are legally bound to buy the property and will need to put a down payment deposit there and then of 10% of the property’s price (the seller is legally bound to complete on the day). You would have to pay the rest of the price (ie 90%) within the next 28 days so make sure you look for a mortgage deal where the lender can complete within that time frame. If you are intending to purchase with the assistance of mortgage funding then it is critical that you know before bidding on the property that the property is suitable for lending purposes otherwise the lender will not be prepared to provide the required funding for completion and you will be left in breach of contact and a lost deposit.
Inspect the property
It might sound obvious, but some people neglect to visit the property they want to buy. In order to make sure it’s for you and decide what your maximum bid should be, visit the property of your choice at various times of the day. Checking the property in real life will also help you determine if it needs any repairs or any other work. A Chartered Surveyor can look at the property for you, alert you to any structural problems, and also give an independent opinion on how much the place is worth so it’s a good idea to hire one.
Prepare for Repairs
Repossessed properties at auctions are more likely to need some restoration work to bring them back to top condition. On the plus side, any renovations you make will probably add value to your home. Try balancing the saving you’re getting at auction to how much time and money you’ll spend making the property liveable.
Appoint a conveyancing solicitor
When buying a property at an auction it’s important to find an experienced Property Lawyer / Solicitor. Your Solicitor will be able to examine the legal pack of documents and ensure that the property is not unmarketable and there aren’t any problems or issues should you decide to sell it in the future.
Stick to your budget
You should remember to never bid beyond your means even if you feel pressed to spend more than you intended. Don’t let your emotions dictate how much you spend – work out what your budget is and stick to it or else you’ll risk not being able to afford to put down the 10% deposit you will need at the auction.
For further advice or information on purchasing a repossessed property at auction contact our Conveyancing team on 01202 877400.