There are pros and cons to many things when it comes to property and investing and the auction route is certainly one of those routes that can divide opinion.
If you are looking to buy a house at auction or sell your existing property, there are some very worthwhile tips and rules that you would do well to heed, if you want to get the most out of this type of property transaction.
Buying at auction
If you are looking to buy a property as an investment or for somewhere to live, a property auction can be a place where you just might be able to pick up a bargain, but there are pros and cons to consider.
A packed auction room with fast-paced sales being transacted at the drop of a hammer, is an exciting place to be, but not very forgiving for inexperienced investors who might get too carried away with bidding and end up with a financial headache.
You would certainly do well to go and observe one or two auctions before you attempt to buy. This will allow you to become more familiar with the process and see what sort of prices are being achieved for the type of property you are interested in.
Once you have a better understanding and a greater degree of confidence as to how an auction works and the prevailing market conditions, you will improve your chances of getting what you want at the right price.
One of the main advantages associated with property auctions is that you can often purchase a property below current market value.
The reason why the price is low could be because there is an issue with the state of the property and refurbishment work is required, or it could simply be that the buyer wants certainty that their property will sale and they need to move within a short space of time.
As it only takes 28 days to complete the purchase after the hammer falls, you will need to have the funds in place that you need, but as a buyer, you also have the certainty that the property is going to be yours within a month.
One of the most significant disadvantages of buying a property at an auction, is that you rarely get enough time beforehand to check on the condition of the property by getting a professional survey done.
You need to thoroughly check whether the property you are interested in needs some serious renovation and get some professional help and an opinion from a qualified builder or surveyor before you commit to buy.
They can go around the property before the auction date with you and assess the state of the property and provide a reasonable estimate as to what work needs doing and how much it is going to cost.
Buying a property at auction without the security of a full survey is a risk, which you can minimise with a professional opinion and by ensuring you do not pay over the odds, based on what you think you need to spend to put it right.
Selling at auction
If you are thinking of selling at an auction, you need to ask yourself a few relevant questions in order to confirm if the auction route is the best way to go.
There is always an element of uncertainty as to whether you are going to achieve the price you want, but you can set a reserve price and a fair number of properties do sell well through auction, so it is definitely an option worth considering.
Good reasons to use an auction
If you have a property that needs modernisation or some other form of redevelopment or refurbishment, selling through an auction should help to attract the right buyers, who will be looking for a project to take on.
It is also worth putting your property through auction if it has been on the market for some time. Sales figures support the theory that a property which has been on the open market for longer than usual, still has a good chance of achieving its true value at auction.
Another common reason for using an auction to sell your property, is if it is slightly unusual or unconventional in some way, and therefore does not immediately appeal to conventional buyers who will often be searching through high street agents rather that attending property auctions.
Whether you are buying or selling at an auction, provided you are fully informed and have a reasonable understanding of the process, it is certainly a route worth considering.
Bryan Faircloth is a consultant who specializes in investment and financing. He likes writing about the latest trends in real estate and other types of investing. Look for his articles on many finance and real estate sites.