With the news that the Chancellor has put stamp duty on hold for the first £500,000 of all residential property sales (subject to some exemptions) many first time buyers are choosing now to make their move and secure their first property.
Yet one question first time buyers have that often goes unanswered is whether or not they can buy their home at auction. The good news is that first time buyers can buy at auction – and many do for the chance to grab a unique property they can make their own.
However, like any big decision, there’s a lot to consider if you are a first time buyer looking to buy at auction. Here are some of the key considerations you’ll need to think about when deciding if it’s the best choice for you.
The auction process is different from the traditional house buying route
As a first time buyer, it’s important to understand that the auction process can seem very different than if you were to buy a property through an estate agent.
The auction process is typically a lot quicker and requires less time before you get the keys and can claim the property as your own. While this can be a big advantage for a first time buyer who’s eager to secure their first home quickly, it does mean you’ll have to pay the deposit, which is typically 10% of the property price, upfront.
You’ll then have 20 business days to pay the remainder of the auction price, unless varied in the legal documentation. If you’re intending to cover the costs through a mortgage, it’s important that you have all the necessary mortgage arrangements in place prior to placing your bid. This allows you to prove you can afford the property and the agreed price and successfully pay it within the 20 business days given.
You still need to do your research
While the auction process makes it easier for first time buyers, that doesn’t mean you won’t have to do the necessary research to find the property for you – and ensure it meets all your needs.
Take the time to really get to know the property you’re interested in and don’t be afraid to ask questions. While some houses are ready to be moved in to right away, some will require some renovation before being ready to live in. These properties can be seen as an investment (subject to purchase price and market conditions), where through renovation the house price is likely to increase, allowing you to make a profit should you wish to sell the home later down the line.
We recommend watching any available video walkthrough of the property and also viewing the property itself if you’re interested in making a bid come auction day. Depending on the level of work that will need to be done, you may also want to hire a surveyor, who can help give you an estimate on what work would need to be completed – and how much it might cost.
Understand your legal responsibilities as a first time buyer
Just like purchasing a house through an estate agent, buying your first property at auction comes with important legal responsibilities and obligations you need to be aware of.
Each property on offer at auction will come with a ‘legal pack’ which contains important legal information about the property. Packs will vary slightly from lot to lot, but most will contain the property’s title deed, leases, land registry inquiry and energy performance certificate as standard.
Much like when you sign a contract when buying a property through an estate agent, if you’re the winning bid at auction, you are entering into a legally binding contract to purchase that property. Make sure you’re committed to the sale before placing the bid.
Buying at auction as a first time buyer
Buying a property as a first time buyer can be one of the biggest decisions you make in your life, but the opportunities to grab a great property means more and more are turning to buying their first property at auction.