Pros And Cons Of Buying At Auction
As with many things in life, there are both pros and cons to buying at a property auction. A lot of this comes down to your preparation and discipline, so as to enhance the possibility of there being pros and reducing the chance of there being cons for you.
Probably one of the biggest cons is that many people get carried away in the bidding process, and go over their budget. No matter how calm and rational you are in normal life, sometimes the adrenaline gets pumping, you enter a bidding war, and end up spending significantly more than you intended to.
One of the main reasons that this happens to otherwise calm and sensible people is when bidding on a property you have already invested time and possibly money in it: time going and looking around it, and money if you have had a survey done on the property as is recommended by auction experts. Psychologically it can be hard to let go of a property if you know you have put money into it that will end up in some sense being wasted if you don't become the owner of said property. However, when the hammer goes down, there is no pulling out. So remember that you need to be as calm as possible and as disciplined as possible so as not to spend beyond your budget, a budget that you sensibly picked as a realistic figure for the property.
One of the biggest cons that many people don't realise is to do with the financing: you have to pay for the whole house within 28 days, and 10% straightaway. There is more detail about this in our article 'things to be aware of when buying auction property' so please read that for further details on the finance side of buying at auction.
So, the main cons are that you could get carried away and spend too much, you will need to be able to finance part of the property straightaway and the rest not long after, and that you will need to spend time and money upfront with a chance of no return, in order to safeguard against buying a house full of (nasty) surprises.
The pros? Well, it can be a very good way of getting a property at an attractive price (a lot comes down to luck on the day, how well the auction is attended, who else has viewed the property you are interested in, whether they were interested in other properties too and have already bought one or more of those, and who they are: eg builders, serial investors with lots of cash, or other first-time buyers with possibly more modest budgets). And of course, if a property you like is only made available at auction for whatever reason, then it might be the only way you can get it.
Another pro is that the process can be very quick, so not only does the seller get to sell their house at speed, but you can also get to own one very quickly too. Just bear in mind before viewing auction properties that they often need more work done to them than houses sold via the traditional estate agent method: this is often due to the types of property coming up for auction, eg properties that someone has lived in all their lives with little maintenance and then the property is sold upon their passing.
Hopefully this has given some idea of potential property auction pros and cons - please read the other articles in this auction section to find out more about other elements of the auction process.Last update: 03 May 2015
More first-time house buying articles:
- Tips on Renting in London
- Getting a Survey on an Auction Property
- The Downside of Renting versus Buying
- Property Checklist for First Time Buyers
- Give Your Home New Life