How Auction Houses Work?
There are many benefits of buying a home at auction. You get many properties to choose from, and it is possible to bag a property for lower than the market rate. The level of competition is also not as high compared with buying homes the traditional way.
Buying homes at auction has some risks as well. If you are inexperienced, you may not know what to look for when purchasing a home, and end up buying a property with hidden flaws that are costly to rectify. Therefore, it is vitally important to be aware of the whole auction process before you buy a house at auction.
Which Homes are Sold at Auction?
Homes are sold at auction when:
When the Mortgagers Fail to Pay the Mortgage for a Few Months
If a homeowner does not pay the mortgage for a period of 4-6 months, the bank issues a notice of default. The mortgager will have to pay the amount within the given time window, or negotiate with the lender to find the best solution. If the property owner fails to do so, the lender can force the homeowner to move out of their home, and put the home up for auction. These auctions are handled by trustees hired by the bank.
Sometimes foreclosure auctions get cancelled at the last minute. It happens when the lenders fail to get essential documents from the homeowner, or the owner finds a way to save his home.
When the Homeowner Does Not Pay Council Tax
A home can also be sold at auction if the owner fails to pay council tax on time. In this case, the unpaid tax authority has the right to seize the property and sell it at auction to recoup their losses.
Where Does the Auction Take Place?
Auctions usually occur at physical locations like the conference room of a hotel, or they may take place online. With the increase in internet usage, online auctions are gaining more popularity.
How to Find a Home Auction
The best way to find authentic information about auctions is to contact your local auction house or visit their website. You can get their contact information from their website and talk over the phone to get detailed information before you buy a house at auction.
However, keep in mind that information available on the internet is not always accurate. For instance, the website may list a home that was initially meant to be sold at auction, but later the owner cleared their debts, meaning the property was removed from auction.
Local real estate agents also have information about auctions. You can also reach out to them to get the details.
What You Need to Know Before You Buy a House at Auction
If you want to have a good experience buying a home at auction, it is necessary to first learn the basic rules and regulations of the auction.
You need to register and submit a refundable deposit to the party hosting the auction. We would recommend that you reach the auction house one hour before the auction starts to get familiar with the system, and obtain the official card that you will use when making a bid.
Accessing the Property
Potential buyers do not always get access to a property for a thorough inspection. You may not be allowed to walk through the entire building or bring your agent with you. However, you should avoid buying a house that you have not inspected yourself.
Checking Property Condition
If you are going to buy a house at auction, it is important to know that the house was possibly owned by a person who could not afford to pay their mortgage. So the chances are the previous owners probably could not afford to carry out regular home maintenance as well. Auction properties are not repaired before they are sold.
The buyer has to purchase the home and spend money on its repair and maintenance, which is why auction property is often cheaper than other property for sale through regular means.
Therefore, you should thoroughly check the house's condition and then make an estimate of its repair cost. That way, you will be prepared in advance for the expected costs.
You should examine the neighbourhood, and get information about the property’s ownership history from any neighbours that are willing to speak with you..
Making Payment
Auction rules and payment options vary from one auction house to the other. If you want to buy a house at auction, you should be aware of these rules..
Mostly, the buyer has to make full payment a few days after winning the auction. If you fail to do so, you will not get your deposit back, and you will also be banned from participating in future auctions.
The Wrap Up
Buying a house at auction is a good idea if you are looking for a bargain and ready to do the extra legwork. However, make sure you conduct an onsite inspection of the house, and check its neighbourhood thoroughly before investing in a property at auction.
