If you have never tried online house auctions before as an investor, you should definitely consider it. You might pick up a bargain! And it’s Covid safe, of course! Online auctions are basically like being in an auction room – you can see the auctioneer live and bid on your lots. Today’s blog is all about how online auctions work to help you to decide if they are right for you.
Register for the Auction Beforehand
When you see a house that you are interested in bidding on, you will need to register with the auction house prior to the day (usually over 24 hours before the auction commences) so it is important that you do this. The verification process is vital as it ensures that you are who you say you are, and limits fraudulent transactions. You are likely to be asked of two forms of ID and if you are purchasing through a LTD property company the incorporation certificate. You will also need to register a debit card for the initial funds.
Read the Legal Pack!
The legal packs provided will give you the searches, land registry details and the contractual details for your LOT. It is essential that you read these BEFORE auction day to avoid nasty surprises such as your LOT being leasehold when you thought it was freehold, flood risk or unknown fees! Most auction houses take an admin fee and an auction fee. You will also have the costs of your conveyancing and probably the sellers solicitors fees. In short, make sure that you have surplus cash to cover this. If you do not and cannot complete, you will lose your fees and deposit which is quite a hefty sum.
Secure Finance if Necessary
If you are a cash buyer you will have the finds for the maximum amount you wish to bid in cash in your bank account (plus surplus). If you are securing finance through a Bridging loan (this will be available much quicker than a mortgage) then discuss any extra finance fees with your lender. Also make sure that you have pre-agreed with your lender exactly what deposit you will need to put down at different bids.
Consider your Maximum Bid
It is a good idea to calculate how much you will need to spend on the auction property to get it up to standard. Also you will need to compare the LOT that you would like to bid on to other houses for sale on the same street. You can also use ZOOPLA to help you with valuation estimates. You don’t want to end up in a situation where you will need to spend more on the house than it will end up being worth, so set yourself a MAXIMUM BID AMOUNT and stick to it.
On the Day of Online House Auctions
Once you have your funds in place, your ID checked and your have filed your intention to bid, you will then login to an online auction room. You will be able to login to a secure platform and increase your bid accordingly. Remember not to get carried away and be forced up in price by other investors. Keep your figures in front of you and stick to them.
If you are the Winning Bidder
If you are the winning bidder, most auction houses will immediately take 10% (or more) plus fees from your registered card. You will usually EXCHANGE on the day of auction and COMPLETE within 28 days – it is very fast as no chains or mortgages are involved. You can quite often get the keys on exchange with a written agreement so that you can start doing the work to your new property.
Once you have secured your new property, consider a day one remortgage to release your equity to bid again and build your portfolio.