Real Estate Auction Sales Surge by 50% - Are Risks Worth the Rewards?

Discover why real estate investors are flocking to auctions, but heed the warning of a property solicitor to avoid costly mistakes.

An increasing number of real estate investors are turning to auctions as a way to secure their next investment, with the number of auction properties sold in January rising by almost 50% compared to the previous year, according to research by the Essential Information Group. This surge in popularity can be attributed to the accessibility and convenience that technology has brought to the auction process. With most auction houses now offering online bidding options, potential buyers can participate in auctions from the comfort of their own homes.

However, despite the convenience that modern auctions offer, property solicitors are warning investors to do their homework before diving into the auction market. There are two main formats of auctions: traditional and modern. Traditional auctions are held at specific times and locations, with bids exchanged rapidly among participants on the day. On the other hand, modern auctions take place online and allow bids until a predetermined cutoff time.

One of the key advantages of modern auctions is the flexibility they offer to buyers, with auctions typically running online for 30 days followed by a 56-day window for completion. This extended timeline can be beneficial for buyers relying on mortgage financing, as it allows more time for the necessary arrangements to be made. In contrast, traditional auctions require completion within just 28 days, which can be challenging for some buyers.

Before participating in an auction, it is crucial for buyers to thoroughly review the auction pack, which contains essential details such as proof of ownership, lease agreements, conditions of sale, additional fees, and search results. It is also advisable to have a conveyancer review the auction pack before bidding to ensure that all necessary information is understood.

Financial preparedness is another key aspect to consider before bidding on a property in an auction. As surveys are not typically conducted before the auction, buyers should be aware of the potential risks of structural or repair problems that a property may have. Having a financial buffer for contingencies is essential to avoid any unexpected expenses after winning a bid.

While auctions can be a great way to secure a real estate investment, it is important for buyers to do their due diligence and be prepared for the potential challenges that may arise. Setting a budget and sticking to it, as well as being aware of any potential issues with the property, can help buyers avoid costly mistakes in the long run.