Top Tips for Buying Repossessed Properties at Auction

Posted by myarticlenetwork on February 16, 2010

Due to the current economic crisis, the housing market has been in turmoil in the last one year and, as a result, there has been an enormous growth in home repossession – many of these end up at auction. Repossessed properties sold at auction typically go for anything between 20% -50% less than their market price, meaning they pose extremely good value for private buyers and investors alike.

Although there are some horror stories concerning repossessed houses being inhabitable or having no kitchen and bathroom, the majority of repossessions are in good condition – they are simply homes seized back by the bank after their owners could no longer finance reimbursement on their mortgage.

If you are planning to buy a repossessed home at auction, look out for the property section of your local paper: estate agents sometimes advertise such houses and call interested parties to bid. Also, you can subscribe to a property auction mailing list; the company in question will then send you details of following auctions, either through the post or by e-mail.

Below are some ideas on how to successfully buy repossessed home at auction:

* Be knowledgable about auctions and repossessed homes for sale by doing research before the purchase: visit a few property auctions to become well acquainted if you are unfamiliar with them. The auction catalogue will feature all properties in the auction, with {detailed description|description} and guide price, and conditions of sale: these are legally binding, so make sure you read carefully

* Always visit a house you are interested in before the auction takes place – do not rely on the catalogue description. You will need to see the building with your own eyes to ensure it is in satisfactory condition. It is necessary that you get an inspection done on any property you are interested in, in order to recognize structural problems if there are any.

Primelocation.com can give you an idea of how much similar properties sell for in a particular area, so you can bid accordingly, and upmystreet.com can give you general information about an arearegarding crime levels, socioeconomic background and amenities.

* Be sure of your budget prior to the auction and do not exceed this. It is easy to get carried away with bidding in the auction room, but it is important to hit your budget for affordability reasons. If you are not sure that you do so, consider taking somebody with you to the auction or get an auctioneer to bid for you.

* Bidding at auction: you will be able to get access to a selling pack regarding any properties you are interested in, and this will hold details of local authority and environmental searches, leases, title deeds, and fixtures and fittings form (outlining all fixtures included in the sale).

If you are purchasing a house for letting, it is important to know a little bit about the area you will be purchasing into. Most importantly, the rental market there should be strong – towns or cities with universities and major hospitals usually yield a steady stream of tenants.

* Arrange finance or a mortgage prior to the auction: If you bid on a property and win the auction, then you are legally required to pay a 10% deposit on the day and complete within 20-28 days. If you cannot complete within this time you will lose your deposit, so ensure you have the required money in place.

It is important to also take into account the cost of any refurbishment needed, as well as any other associated costs, such as solicitor’s fees, insurance, and stamp duty. For properties costing over £175,000, stamp duty is 1%, 3% on houses in the £250,000-£500,000 bracket, and 4% on property worth in excess of £500,000.

Michael O’Flynn, head of content for FindaProperty.com, states:

‘In recent years auctions have become an increasingly popular way to buy and sell property; so much so that the number of flats sold at auction annually has increased by 40% since 2000. Over the same period, the number of houses sold has increased by 30%.

Provided you know what you are doing, auctions can be a great way to make a quick sale and the perfect place to pick up a bargain.

The lack of mortgage finance and a rise in the number of repossessed properties means that this trend will probably continue in the coming year.

However, buyers with little experience should approach the auction room with caution. Seek professional advice, set a limit beyond which you will not bid, and be sure to do the due diligence before you enter the auction room. Once the hammer comes down you have only 28 days to complete – so be sure you have the finance in place and know exactly what you’re bidding on’.