There have been many challenges in the housing market over the past couple of years. Rising mortgage rates, economic uncertainty & the cost-of-living crisis have all impacted homeowners, renters, landlords & investors.
But as the quest for affordable housing continues, the answer may be at auction.
Last year the number of residential properties sold at auction increased by 14.8%, and according to data analysis by Finbri, the North West stands out as a prime location in the UK for property investment at auction.
Currently, the average price for a home in the North West is £218k and the latest figures show the average property sold at auction in the region during Oct-Dec 2023 sold for £105k – a huge £113k below the average market price.
Compared to London, where the average price of properties sold at auction was £70k less than market value, the North West is a region for investors to capitalise on – especially if you’re looking for properties to rent out.
Increased demand for rental properties in North West
Last year, on average, there were more rental enquiries per property in the North West than in the rest of the UK.
Rental properties in the UK tend to get 20 enquiries on average, but in the North West, the average is 30!
And as demand for rental property is outstripping supply, rental prices increase.
Rental prices in the North West have increased by 6.5% year-on-year, as monthly rent from January 2023 to January 2024 rose from £941 to £1,002.
The 6.5% average rental increase in the North West exceeds Greater London’s 4.6% increase.
While the annual rental increase is good news for landlords & property investors, renters in the North West should take some comfort in knowing that the South East, East Midlands, West Midlands, Yorkshire & The Humber, & the East of England all saw their average rent increase by more significant percentages.
But if you’re looking to invest in property at auction, there are some key things you need to know.
Buying a property at auction – key information
- Get the viewing catalogue
Usually available 3 weeks before the auction.
It will contain the properties & their guide price.
- Register with the auction house
Complete a short registration form & you’re in the auction!
- View the properties & research
Take a builder or surveyor with you to get advice on the cost of necessary repairs – it’s best to know this now rather than later!
Check out factors such as the location of schools, shops, hospitals, amenities & transport links & look at the market to see the types of properties selling & what they’re going for.
- Check the legal pack
It will contain the conditions of the sale & results of local authority searches. Study it carefully & send it to your solicitor to look over & check the small print – this will ensure you avoid buying a property with a severe legal issue.
Always get a solicitor’s advice.
- Get an independent valuation & set your price limit
Know any refurbishment costs; don’t pay over the odds or get carried away & spend more than you can afford.
- Get your finances in place
You *have* to know how you will pay the deposit & remaining balance if you win.
The typical routes for financing are either property auction finance or a traditional mortgage.
Auction finance can ensure you complete your purchase fast – with up to £300K available within 3 days, £700K available in 7 days & up to £250m available from 14 days.
What do you need on the day of the auction?
- The right paperwork
- Photo ID, proof of residency (such as a driving licence, passport or utility bill).
- Solicitor details.
- The means of paying the deposit.
- If your bid is successful, SPEED is a factor & you’ll usually have to pay:
- 10% of the sale price on the day as a deposit.
- The remaining 90% usually within 28 days – if you don’t pay this, you’ll lose the deposit & the property, so having fast finances is essential.
- An administration fee to the auction house – around 2% + VAT of the final sale price.
- Stamp Duty Land Tax.
- Conveyancing solicitor fees.
- Survey costs.
- Building insurance.
BUYING PROPERTY AT AUCTION PROS
- Price – you can find a bargain at auction & purchase for less than the average property price.
- Speed – the entire process should be complete within 28 days.
- Reliability – there’s usually no property chain risk, contracts are signed when the auction is complete & you won’t be gazumped.
CONS
- Being outbid – if you’re outbid & lose, you will have lost the time, effort, & money spent so far.
- You must have the money in place – you have to pay the deposit on the day & pay the remainder usually in 28 days, or you’ll lose the property & everything spent so far.
Stephen Clark, founder of Finbri, a bridging and property development finance broker, comments: “Properties are available at auction for a few key reasons: they’ve been repossessed & the lender is looking to get as much of their money back fast, a homeowner is looking for a quick sale, or it’s an unmortgageable “problem property” – ideal for investors!
“Buying property at auction can be a rewarding process, but don’t go into it with your eyes closed & you should expect some hard work along the way. But you might find a bargain if you have your finances in place & you’re prepared.”
