10 Things most people won't tell you about online property auctions
Online property auctions are most common among real estate businesses in London. The phrase “property auction” often brings to mind the stereotypical image of a group of investors, brokers and agents huddled around an auctioneer on the county courthouse steps.
If you’ve contemplated selling or buying a property recently you’ve undoubtedly encountered plenty of online auction sites of one sort or the other. The online auctions has given the sellers access to unlimited buyers. And, for buyers it has given access to unlimited properties on display with plenty of choices.
Sellers, buyers, and their Realtors can benefit tremendously from the unique advantages of online auctions, but only if they do their research and make sound decisions. Buying or selling at a property auction can be both exciting and terrifying. There’s an element of doubt and uncertainty that you don’t get in standard property sales. And no matter whether you’re experienced or attending your first auction, there are few things that you need to know that most people won’t tell you about. Here we have listed out the top 10 things you must know about property auctions in London.
1. Start with small auctions:
If you’re new to online house auctions, start out by going to a smaller one. Even if you don’t bid at your first event, you’ll be able to see what takes place and what type of people attend.
2. Do your Homework
Before you get into any property auctions it’s necessary to get to know about the market as a whole. When it comes to auctions the need for knowledge intensifies. Usually auction catalogues are released a month before the auction day. Therefore, you’ve got very limited time frame to do all the research on the property. Finally, when the day arrives you need to know everything such as how much the property sold for in the past, how much work needs doing and what it’ll cost and so on the list goes on.
You also need to add in auction costs – this can include a set fee to the auction house and a percentage to the vendor. Check what they are before selling or buying.
3. You need at least 10% bank deposit
Before you commit yourself to bid for property online, you need enough money in the bank to cover the deposit which is usually around 10%. While, a bridging loan can help you to secure the property you need, any failure to provide the deposit could end up with you being sued by the vendor. And they usually win if it goes to court.
4. Properties always don’t sell at auctions
According to a recent estimate figures, around 28% of properties fail to sell at auction. So if you’re hoping to sell your property at an auction, don’t start planning your future business model around it because there’s a chance it might not sell.
If your property don’t get sold at a property auction, the reserve prices for unsold properties will be revealed to the public. This means everyone will know your lowest sale price, putting you on the back foot for negotiations.
But if you’re a buyer and want a real deal, visit the auctioneers the day after an auction and ask to see the list of unsold properties and their reserve prices before they go on their website.
5. Guide prices cannot be real
Many people think they can pick up great deals at auctions because they have only checked the guide prices. In reality, the guide prices can often be less than the property’s worth to drive up interest.
As guide prices can vary from auction house to auction house, as a rule of thumb try adding an extra 10% on to guide prices for a more realistic selling price.
6. You’ve got very less time
The time frame until the auction date is actually very short for you to find out about properties and putting a deposit down. If you’re a serious buyer, you’ve got a lot of work to get done during this period.
This includes everything from arranging a survey of the property, having your lawyer check the legal pack and getting your finances in order to get a list of questions that needs answering.
7. Take care not to go over budget
When auction battle gets hot, the prices can sometimes go over the real budget. You must be careful about it as it can completely alter your whole business plan for property investment. This could mean having to cut back on the amount you were willing to invest in it or raise how much you’d be willing to rent it for.
8. You cannot back out from a deal
With property auctions, once you successfully bid, you must buy. If you do back out, then the seller takes your deposit with them. It’s not all over, and they can be well within their rights sue you for any losses, especially if they’re forced to sell the property at a lower amount.
9. It can get personal
While you actively get involved into the auctions and make it part of your business, everything can get more personal. You see the same faces over and over again. While, some of these people can likely become your friends, others can get your enemies. This could lead them to target the same properties as you, pushing the prices up with bids or trying to put you off during the event.
10. Be Smart and don’t fall into temptations
Try to look confident throughout the event of auctions. If other developers spot you weak, they might get over you and you may find yourself lost in the battle. If you’re a seller, there’re chances that people can approach you with to do a deal to take it off the market for the guide price. Don’t fall for such temptations.
Conclusion
Online house auctions or house bidding is a field for just a few clever developers. While this is great for sellers, online property auctions can provide a bigger pool of potential buyers. Therefore, knowing these 10 things that most people won’t tell you will really help you before getting involved into the battle field.