Over the last 18 months, competition among buyers in the Edinburgh property market has been fierce. Properties for sale in Edinburgh have sold quickly and achieved premiums well in excess of the Home Report valuation. As a result, a small number of buyers have turned their eye towards property auctions thinking that they may be able to pick up a bargain.
But what are the pros and cons of buying at auction, and what do you need to be aware of if you’re thinking of buying a property this way?
Why Buy a Property at Auction? At an auction bids are open. You know what the buyers you are competing with have bid and, if you want to secure a given property, you only need to beat that bid by a small amount.
Conversely, when properties are sold on the open market in Scotland it’s done using a ‘closed bids’ system. This means that you don’t know what offers other buyers have submitted. As a result there is a chance of the highest offer being well in excess of the next highest bid. A good solicitor estate agent should be able to minimise this risk of course, by offering you advice based on the interest in the property and the latest local market conditions, but it's not uncommon to see closing dates where the winning bid is much higher than any other offer.
Properties that are sold at auction also tend to be seen by fewer buyers as they aren’t advertised as widely on major property portals like ESPC so, in theory, you can face less competition at auction.
What are the Drawbacks of Auctions? One of the biggest problems with auctions is simply that the number of properties available is very low. You may face less competition from other buyers but equally you will only be seeing a small fraction of what is available on the market.
Properties sold at auction also tend to be in need of substantial renovation or modernisation. The best advice for the overwhelming majority of sellers just now is to advertise their home on the open market. If a property is being sold at auction there is probably a reason for it, meaning you will struggle to find a home in ‘move-in’ condition. You’ll need to have funds available to cover any improvements that are needed, and costs for renovating a property can quickly spiral unless you have previous experience in this area.
Advice if You Are Buying a Property at Auction If you are thinking of buying at auction, you should do as much research as possible ahead of time. Before you go to the auction:
identify any properties that you might be interested in;
fully plan and cost out any improvements that you would need to make;
find out what similar properties have sold for recently;
decide what the maximum amount you would be willing to bid is for a property and stick to it.
On the day, don’t find yourself getting drawn into a bidding war and paying more than you had budgeted beforehand. If you are comfortable with the research you’ve done and the budgets that you’ve set, how much somebody else is willing to pay shouldn’t matter.
Most importantly if you are thinking of buying at an auction, don’t overlook the properties that are available on the open market. If you want to find a bargain, the last thing you want to do is shut yourself off to the overwhelming majority of properties that are out there!
If you have any questions about buying or selling get in touch with us today on 0131 667 0232 or by emailing firstname.lastname@example.org and one of our team will be delighted to help.