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Basics of Property Auctions

October 7, 2009 in Property Investment by Kez

If you are in search for a traditional route of finding investment properties in the UK then property auction is one of the oldest forms of property investing and an age old favourite for those looking for exciting bargains. Information on property auctions can be easily found both in the local media and the internet. Announcement for property auction is normally advertised a few weeks in advance before the actual auction takes place. Look out for announcements in your local newspapers and the internet.

If you are reviewing a specific auction and want more information about the properties to be sold, go to the auctioneer and buy yourself an auction catalogue. The catalogues (if not free) are normally sold at a nominal fee. You will see detailed information regarding the property sale, the prices, viewing times and any special concerns of the property, if any. Make sure that you appoint a solicitor to do check any documentation and contracts of sale for the transaction ahead of the auction.

Auction houses are not commonly known for offering the best of presented properties. A lot of the properties sold at auctions are repossessions, receiver stock, bankrupt stock, under developed properties, properties from people who want to sell them quickly for one reason or the other, so in many cases the properties are not well maintained. So when viewing the properties of your choice, have a surveyor or builder with you so you can have them check out the foundation of the house and other concerns as well. This is strongly advised as bidding on a property that you have not inspected can potentially result in a disastrous purchase. A proper inspection will uncover any hidden and unwanted surprises that may adversely affect the potential investment and help you plan a budget for any potential work that may be required to bring the property into good habitable order. A thorough inspection will tell you if a property is worth bidding on all together and the scale of any re-development work.

An auction property will normally have two prices associated with it, a guide price and a reserve price. Remember that a guide price is different to the reserve price. The guide price is the rate at which the property is expected to sell and the reserve price is the rate at which the owner is expecting to get. Guide prices are just that, a guide that is for information purpose only and should not be relied upon as an indication of the reserve price.

The auction house typically lays down some rules regarding property purchasing and time constraints. A 10 percent deposit is required at the day of the auction. The purchase should be completed by the end of the 28 days after the auction; this is reduced to 14 days for some repossessed homes. With the little time span you should make sure that you have all your finances, whether that be buy to let mortgage or a commercial mortgage or cash before you join any UK property auctions.

At the auction house, each property is given approximately three minutes for bidding. This is simply the average time and not any rule as such. Once the hammer resounds, you have to immediately pay 10 percent of the price of the property and sign the contract of sale. Bid on the right property and bid only within your limits to achieve the best deal. If you do not yet feel comfortable regarding the whole auction process, you can always attend a few on a trial basis before actually bidding.

A good tip for bidding at auction is not to get emotionally attached with either the bidding or the property. Many beginners make the mistake of over bidding beyond their budget for a property because they get emotional, if not excited, for the property of their choice. It is IMPERATIVE that you stick to your original budget to ensure a good investment purchase. If you are worried that you might get emotionally attached to a property or that you may exceed your budget limits, ask a friend or a solicitor to do the bidding on your behalf. If you cannot personally attend an auction for whatever reason, you may still join one via the telephone or through the internet.

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