Buy Property From An Auction – How Much Will I Need?

This question, like so many other questions regarding auction properties, is difficult to answer and depends to a large extent on the price of the property you intend to buy. All property for auction is advertised with a guide price (calculated as a percentage of the estimated market value) and more often than not a reserve price as well.

It is the reserve price you need to look at when deciding whether you can afford a particular property for auction, as the auctioneer will rarely sell for below the reserve price unless specifically instructed to do so. If you can’t afford the reserve price on the property you’re interested in it is worth approaching the auctioneer before auction day and asking them to convey an offer to the vendor. Sometimes a vendor will purposely put a high reserve price on a property in the hopes of making more money, and so a sensible offer from you may well be accepted.

Before Auction Day

It is vital that you visit property for auction several times before auction day. It is also advisable that you take a builder, architect or surveyor with you so that any major faults in the property are made apparent before you buy. Obviously builders, architects and surveyors cost money so you should factor this outlay into the total amount you’ll need in order to buy a property for auction.

Of course you can skip this cost if you want but the fact that most auction properties are in a state of disrepair could mean you lose out on a lot more in the long run.

On Auction Day

Buying property for auction actually on auction day will involve you handing over at least 10% of the purchase price in the form of a deposit. If you are unsure of how much this will be, again, use the reserve price of the property as a guide. You know you are going to need access to 10% of the reserve price at the very least, and you should be ready to pay more if the purchase price goes above the reserve price.

How you pay the deposit is up to you but it will be expected before you leave the auction house. Some people choose to pay with cash whereas others use a bank card or credit card. You will also need to show you have the means to pay the remaining 90% within 28 days.

After the Auction

Obviously following the auction you will need to complete the sale and hand over the remaining 90% of the purchase price. You will also need to pay solicitor’s fees and maybe the arrangement fee if you intend to use a buy to let mortgage as your means of finance. You should also factor in the cost of renovations, decoration, furnishings etc. that will be needed to attract tenants.

All in all, buying property for auction is a great way of making a huge saving on the market value of a property, but there are still immediate costs involved. Make sure you calculate the costs fully before bidding, and never underestimate how much the competition might push the purchase price up by in the excitement of auction day.