If you are in the least bit familiar or a fan of Homes Under the Hammer, you are very acquainted with how auctioned homes work. For those of us who visit local auctions as a result and are on a quest for a guide on how to make a bid, you have clicked on the right article! Before we dive into it; let’s first set the scene for our story.
Meet the Ramseys, they are an expectant couple that are hoping to try and bid on an auction house. They have researched the process and have watched a few episodes of Homes Under the Hammer for good measure. Armed with the knowledge they have gathered from their research they have set off to Middleton Manchester for an auction that’s being held there and have invited us on the journey. It might help to mention here that the Ramseys are trying to procure a second home to potentially use for buy-to-let purposes, as they don’t plan to actually live inside the auctioned home.In spite of the needs for renovation, the couple think this route is best for them and their budget. How the latter determination was made will be discussed in the next section.
Before the auction
In order to make the best decision the Ramseys studied the house they had an interest in and calculated the improvement budget it would require. Next they asked an estate agent to provide a valuation of what the property could be worth if the work they have budgeted for is carried out to a good standard. After acquiring the expected value from the estate agent, the couple sit down to a sheet of paper and calculate the difference between the estate agent’s quote and the improvement budget. The resulting value, minus the legal fees they are expected to pay, is what they are using for their maximum bid at the auction. Finally, they read the legal pack with their solicitor in order to know the legal quirks of the property. Armed and prepared, the Ramseys are ready for and confident about the trip to Middleton in the morning.
During the auction
In the morning, the Ramseys set out early for the auction. It being their first time, they have made sure to be early, in order to watch the process live. Not only that, but they were punctual in order to secure for themselves seats that were within view of the auctioneer. Doing so was advantageous for them; because it ensured that they were not missed whenever they placed a bid.
When the time came for their lot to be auctioned, the Ramseys did their best to remain calm. They had seen how chaotic the bidding process can be and how easily a bidder could overbid and be ruined. Consequently, they decided to be level-headed when their turn came; to stick to their plan, and not to worry about what others thought of them. Soon after the auctioneer began the bid for their property of interest, the Ramsey ensured to bid early. By early we don’t want it to be understood that they were the very first to place a bid. Instead they bided their time well and used the opportune and earliest moment to indicate their interest in the property.
How exactly did they communicate their interest, you might be wondering seeing that the options are varied. Well, they raised their bidding number when the auctioneer was looking in their direction. Giving a clear indication that they wanted to bid worked in the Ramseys favour and the auctioneer was never in doubt as to their gestures or movements. The couple were very careful to tell of their interest because doing so resulted in the auctioneer checking back in their direction for further bids.
Lastly, and most importantly, the Ramseys made sure to keep within their maximum limit. They were controlled enough to not let the events of the day persuade them to up their budget. They kept this risk forever in mind and thankfully were able to secure the property within the budget they set!
After the auction
Now, you must join us in congratulating the Ramseys on successfully securing the property they pursued. Please note however that this isn’t always the case. There are instances where bidders are outbid on their interests and leave empty-handed. Still others overbid and secure their intended properties and leave with very empty pockets and bank accounts. The Ramseys’ case has the ideal outcome, but please remember that other unfavourable results are possible. Now that the hammer has come down on the Rameys’ property they are now legally bound to complete the purchase. To do so they have brought proof of funds in the form of a mortgage agreement in principle. Additionally, and on the day, they pay 10% of the purchase price as a deposit, as well as show their two forms of identification to the proper authorities. They will usually have between 14 days to six weeks to complete and pay the remaining balance of the purchase price. Any outstanding costs and completion details will be clearly stated in the conditions of sale that accompanies the property.
It is important to add here that the penalties for failing to complete an auction purchase within the stipulated time can be quite severe. A possible penalty could be a combination of the ensuing example. In the Ramseys’ case, they could be liable for the costs of re-selling the property, any shortfall between the price they agreed to pay and the final sales price, plus interest for every day it takes to sell the property. The final value that results in answer to these costs, are often exorbitant, so like the Ramseys please be careful and bid within reason and budget.
Conclusion
For those who see the value and benefits of buying a home at an auction, we hope the essential points we discussed above were a worthy guide for you. Auctions are arguably the best way to avoid lengthy and uncertain buying procedures and bag yourself a bargain. Please note that if you need help in securing a mortgage to purchase the property, one of our representatives will be happy to assist you. Contact us well in advance of the auction so we can find a mortgage product that meets the time-scales of an auctioned home.