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Buying a property at auction can be appealing to many people but what are the advantages and disadvantages?
Auctions will work better for buyers and sellers who want to avoid the traditional conveyancing transaction and the lengthy time it takes from offer to exchange of contracts. With auctions, your sale or purchase is agreed as soon as the hammer falls. This avoids the risk of losing your sale or purchase at a late stage of the transaction or even just before exchange of contracts – as sometimes happens!
At auction, you will hear the other bids for the property. By contrast, if you were to make a bid for a property through an estate agent then you will not be privy to the other offers which have been made for the same property.
There are of course transactional costs associated with buying or selling a property at auction. These costs could include the administration fee payable to the auction house, buyers’ premiums, your solicitors’ fees and any other disbursements incurred when normally buying or selling a property.
You will need to do the research yourself to find an auction house in the right area and then contact the auction house to enquire about the procedure for buying or selling through them. The auction house will also publish an auction catalogue four weeks before the auction so, if you are interested in a property, you would need to act fast!
As you will hear other bids on the property, you could also find yourself in a bidding war which you had not prepared yourself for. If your bid is not successful, then any money you had put into the research of that property would also be lost. But remember there will always be more properties going to auction – so if one property doesn’t work out, then the next one might.
Auctions can be quite daunting for those who are inexperienced, so it’s best to get comfortable with the auction procedure before making bids to buy a property. People can get carried away, so remember what your budget is and stick to it – otherwise you could commit to a financial decision that you cannot afford. Similarly, if you are selling at auction and a buyer who does not have sufficient funds is successful at bidding, then this would mean that the completion is delayed beyond what you anticipated – if indeed it takes place at all. There is also the risk that there are no bids incoming and the property does not sell at auction, in which case you will need to look into the option of selling on the open market.
We would strongly advise anyone selling or buying at auction to consider the above and to contact our expert Residential Real Estate team for guidance.
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