Auction experts are urging landlords to prepare thoroughly before trying to buy a property going under the hammer.
The National Association of Valuers and Auctioneers – part of agents’ body Propertymark – says auction sales have surged some 53% this year compared to last, but warns that it’s not all plain sailing for landlords.
In particular, the binding nature of auction sales means landlords must understand the differences between auction types before bidding.
Stuart Collar-Brown, president of NAVA Propertymark, says: “For buyers, the key advantage is certainty; once the hammer falls, the sale is legally binding.
“That also means there is far less room to change your mind, so doing your homework in advance is key.”
An unconditional auction means at the drop of the hammer, the buyer is legally bound to purchase the property, with completion typically required within 28 days.
A conditional auction, now increasingly branded as the Modern Method of Auction – requires a reservation fee on the fall of the hammer, with exchange within 56 days if pre-agreed conditions are met.
The speed at which a landlord buyer would have to find the funds for the purchase can catch people out.
“You should consider consulting both a mortgage expert and a bridging loan specialist, as bridging loans are a faster method of securing finance against a property” explains Collar-Brown.
“Mortgage experts will be able to specifically handle the financial aspects to secure an unconditional mortgage offer and confirm the property is mortgageable.”
A short term bridging loan – although typically expensive compared to a conventional mortgage, which can take a lengthy time to arrange – allows you to complete the purchase before refinancing to a standard long-term mortgage.
NAVA Propertymark advises buyers to review the legal pack thoroughly before bidding.
This details freehold or leasehold terms, special conditions of sale, and restrictions on the property.
For sellers, auctions offer a transparent and structured process with timescales that are much faster than conventional treaty sales.
Collar-Brown adds: “This can be especially beneficial for those selling probate properties, chain-free homes, or properties that may struggle to sell through traditional routes. Setting a realistic guide price, based on professional valuation advice, is key to attracting interest.”
This article is taken from Landlord Today