We’re looking at a house that’s for sale at auction at the moment. It has been a steep learning curve and, with the auction a week off, there is still a long way to go. I’ve been to auctions before and wondered quite why so few people were prepared to bid – but now I know. Boy, it’s a lot of hard work, and expense, to get prepared.
Obviously, you can’t just turn up and bid. Well, you can, but you’d be taking a huge risk. So in my case, there are four areas that need to be de-risked before getting into a position to nervously nod that head. I thought I’d pass them on.
1. Financial Viability
You need to investigate how the economics of the site stack up. What is the end value of the finished house – and how much will the project cost to undertake? The selling agent/auction house should be able to give you some pointers.
2. Getting Finance in Place
You’ll need to pay 10% on the night and be able to complete the purchase within 28 days. If you can’t do that, you lose the deposit. So you need to ensure that any lending/mortgage is guaranteed before the auction. This is likely to include requiring a valuation on the property, which usually takes a week or so. Make sure your lender is able to complete in quick time.
Appoint a solicitor to go through the conveyancing work before the auction. The auction house will provide an auction pack with relevant searches etc. but you should engage a solicitor to act on your behalf beforehand, and to ensure your plans are not endangered by something on the legals. You should expect to pay in the region of £500 for this.
You won’t usually have time to submit a planning application on the property before it goes to auction – and nor would it be practical to do so, given the need to appoint designers etc. However, you should get as much of a grip of the plausibility of your proposals beforehand either by studying the local policies or, preferably, consulting the council for pre-application advice. Most (not all) councils will be able to turn it around in a few weeks and it should at least give you a basic idea of what can be done. You could always get a planning consultant to investigate the situation but you will have to pay for this.
There you go. See what I mean about wondering why so few people get that far?