What to look out for when buying a property at auction, insurance for auction property
Many properties are sold at auction are either repossessions or are those which are difficult to sell in the open market. Some of them are difficult to value with an amount of renovation work needed. If you plan to renovate the property you will need buildings insurance cover which we can provide for you Renovation insurance quote
Some properties are tenanted with current tenancy agreements which must be honoured by the owner of the property. Some are low quality or are not suitable for a mortgage. They may not have planning for the use they are being put to. If you are planning on buying the property and keeping the tenant then you will need landlords insurance cover.
Some property will have a defective title. Recently we became aware of a property for sale in East Belfast that was unsuitable for a mortgage. It had been passed through 3 generations of family members who were each left the property in a will. The property did not appear to exist on the Land Registry and the title documents had been lost. After several buyers’ attempts to obtain a buy to let mortgage had failed, the vendors put the property into a property auction.
A property auction is often the place to find very good value property. It is also the place to find wildly overpriced property. Before you go to the property auction make sure you do some research about the area, look carefully are open market prices and don’t get carried away with ‘auction fever’. The thrill of the chase, the animal instinct of wanting to beat the man (or woman) next to you to the post takes over and it is very easy to end up paying over the open market value. Make sure you set a realistic budget and stick to it.
When you buy a property at auction you are responsible for a hefty deposit straight away. This cannot (usually) be in cash or credit card, so funds need to be available for bank transfer or debit card. 28 days later you will be required to complete on the purchase so make sure you have all the money you need for the property before you wave your arm in the air to bid! There is very little to time to arrange a mortgage so don’t rely on this to pay the balance within the 28 day period because it likely won’t happen and you will be in breach of contract.
Make sure you are aware who pays the auctioneers fees and this can vary. Also, look at the legal pack. Many people never look at the legal pack which is always available prior to sale. If you don’t understand the paperwork you need to ask a solicitor.
Remember, some property is sold at auction because it is difficult to sell on the open market so the first question to ask yourself is WHY the property is being sold there rather than the open market when a higher price is often achievable. Some property may be subject to a lifetime tenancy, the rent may be regulated, and the tenant may have an option to buy the freehold. There are many reasons why you must understand what the legal pack is telling you.
A good tip for buying a property at auction is the location of the property and the location of the actual auction itself. If the auction is in Southampton and the property being sold is in Belfast for example, it is unlikely you will face many competitors on the auction floor due to the travelling distance between the two. Sometimes you will find property that is being sold at auction hundreds of miles away so it is well worth considering these (particularly if you live nearby) so you can bid by phone.
As soon as the hammer falls you will be responsible for the insurance of the property so please give us a ring or complete our online quote enquiry form for your property and we will be pleased to help. We can assist with most types of property insurance including unoccupied property so please give us a call and request a quotation or complete this online quote form.