Buying property at an auction

We are chartered building surveyors with a wealth of experience in property. We personally have bought at auction, both for companies and for ourselves (in fact we have never bought a house from an estate agent!). We offer a structural survey service on either a one-off property, if you are just looking at one specific property at an auction, or we can offer a day with a surveyor where you can have verbal advice as you go along or, at the end of the day or the next day, a written report in an agreed time scale.

Depending upon when you are reading this, we were literally at an auction a few weeks ago. For a free no obligation friendly chat please call 0800 298 5424.

Buying at auction

We think the place to start is why people sell at auctions. You need to first of all understand why people sell at auctions. Whilst the list is probably endless as to why, we believe the main reason is to achieve the guaranteed best market price in a set time scale and to ensure a certain sale.

Why do people sell at auctions?

So let us have a look at this at bit more closely. They are looking to sell at auctions because:

• They achieve a guaranteed best market price (from the buyers in the room)

• In a set time

• It is a certain sale

The reasons behind the need to do this can range from an institutional property company managing and restructuring their property portfolio to a landlord wishing to dispose of a problem property, or indeed deciding.

For example, that they need funds to buy into a different market, to people that are in a distressed situation. Often this is known as “the D's”, as distressed situations can relate to debt, divorce, death and downturn in the market. We have found it is always a great help if you understand why the owner is disposing of the property. Unfortunately, you rarely do know the real reasons why people are selling.

Property bought at auction with a structural problem

Let us give you an example of a property, which we purchased, where we were able to establish why the owner was selling. This particular property had been purchased using cash with a structural problem and the owner had been unable to get insurance on it and therefore was unable to re-finance (re-mortgage) it. Although they were an experienced builder/developer this was a problem they were not happy to deal with. For the client that we worked for this was not an issue, as they had bought properties with structural problems with us before and also dealt with the repairs with us before. We advised that it would need monitoring by us before an insurance company would insure (assuming the readings in the report were to their liking). In this particular case it took us five years of monitoring before we were able to assure the insurance company that nothing untoward was going on. The property was Listed with a very interesting problem (if you are a chartered building surveyor). When the insurance company were reassured our client was able to refinance the property and ultimately sell it. They were originally able to purchase the property at a significant discount, as they were prepared to take the risk of the structural problems (with our guidance and advice).

Whilst this is a unique situation, it does show the sort of advantages that can be achieved (and profit made) if you understand the issues with the property of buying at auction and plan before you buy at auction!

I am looking to buy a home at auction, what should be my main considerations?

We would say your main considerations should be exactly the same as they are if you were buying a home from an estate agent or via a private arrangement or via a internet agent, everything from the basics of does it have enough rooms for your requirements to is it located close to your workplace, is it near to the right schools, friends, relatives, etc, etc. The additional thing you need to factor in is will you be able to live with the problem of why the property's value has been reduced, be it a structural problem or wet rot, dry rot or woodworm, or even bad neighbours? We have come across a situation where a property was being sold at auction due to neighbours from hell living next door! (This is why it is so important to visit the property and is why we always recommend knocking on the neighbours' doors and this is what we do if we carry out a structural survey for you, because you can buy the right property with the wrong neighbours!).

Buying a home at an auction is about budgeting both in time and money for the inconvenience

In a nutshell, the title really says it all. You need to ensure that the reason why the house or future home that you are buying is at a reduced price you are happy to pay for or live with, whatever the case may be. It could equally be, what we term as “high level repairs”, such as chimney repairs, roof repairs or repair to a bay window. Some of these you can live with for five years plus, others are something that you need to budget to carry out within the year. Incidentally, you also need to budget to ensure that you live with the builders (remembering that it is a team effort when you have builders in).

Have you see the excellent programme by Jeff Howell on Channel 4 called “Don't Blame The Builder”?

For more about buying a house as a home please contact us for a friendly chat and please see our article on how to choose a good builder.

Buying a house as an investment

We believe, as a long term investment, there is nothing better than buying property and whilst you can get statistics that show you are better off investing in property than stocks and shares, or in your own company, we like investing in property as it offers a hands off investment (if you wish it to be) but at the same time it is, what we would term, a controllable asset. By this we mean you are able to increase its value by adding and amending, i.e. you could extend the property, add value to it or make it more rentable and even add a car parking space, sub-divide rooms to add an extra bedroom, or sub-divide the entire property to make it into flats, as many people have done over the years, so you certainly won't be the first one to amend or extend the property. All of these things make it, in our eyes, a very good investment. We would add that this is as long as you buy right, rent right and sell right.

Buy right, rent right, sell right

These three phrases start with buying right, where auctions can offer an excellent opportunity to add a good price. There is normally some issue with the house. It may be anything from it being in a poor area, to having a requirement for large building works, or structural problems, or falling into the “D's” category that we mentioned earlier in this article; just to repeat it is such things as debt, divorce, death and downturn in the market. All can turn people into motivated sellers where they need to sell property quickly.

Equally, we also have the categories of the investment seller, which needs the certainty of a sale that an auction gives.

Buying at the right price

Unless you know the property market well and understand the structure of property, then you will need some advice somewhere. You life isn't necessarily as it is on TV property programmes, such as “Homes Under The Hammer”, “Location, Location, Location”, “To Buy or Not to Buy”, “Property Ladder” or “Grand Designs”, to name but a few. Remember that property TV programmes are about entertainment, not education. Some of the boring things that need to be done never get seen or shown but they nevertheless need to be done and some of the costly mistakes.

Picking the right price is what the market value is, less the cost of any work that you need to carry out, less any profit margin and make sure you stick to that price. We literally saw only a few weeks ago people paying at the auction higher than they could afford in the high street. This can only be due to them getting carried away at the auction (auctioneers are skilled at their trade after all, doing it week in week out), that they hadn't carried out the right research to buy the properties at the right price, that they had more money than they knew what to do with, or that they had recently won the Lottery!

Often, but not necessarily, properties are sold at auction because they have property problems. We were involved with an auction property where a heavier roof tile had been used on a not very strong roof structure and caused the walls to spread. This in turn had led to the gable end wall coming away, which ultimately had to be part re-built. We also dealt with a public house, ironically called The Bitter End, where dry rot was identified in it and in the adjoining property. A very large property company simply decided to sell the public house and the adjoining shops. There are, of course, many properties sold in auctions that don't have any property problems at all and we just want to make absolutely sure that you are not the person buying the one with the property problem!

We would refer you to our article “Buying at auction, frequently asked questions”, where we have put together some frequently asked questions regarding buying at auction.

We have produced the following articles about buying and selling at auction which you may find interesting:

Buying property at an auction

How to buy a property at an auction

Buying a commercial property at an auction

Buying off market -v- buying at auction

If you truly do want an independent expert opinion from chartered surveyors with regard to buying at auction then please phone 0800 298 5424 for a friendly chat,

If you want to buy a commercial property these are also sold at auction and we can help you with this. Properties can be sold both freehold and leasehold. We can explain a great deal more about the commercial side of property on our other website www.FirstAssociated.co.uk . We also have a Dilapidations Website at www.DilapsHelp.com and if it is going wrong we also have a website for Disputes at www.DisputesHelp.com .

We hope you found the article of use and if you have any experiences that you feel should be added to this article that would benefit others, or you feel that some of the information that we have put is wrong then please do not hesitate to contact us (we are only human).

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