Property auctions have come a very long way, but when a property is sold through an auction, it evokes a thought that the property must be in a dilapidated condition.
It is not worth buying the property at an auction because it is already in bad condition. Further, the online auction involves too much complicated processes, so it involves too much cost.
There were times when the auction was conducted only in auditoriums, but now it is possible to buy an auction property online. The auction industry has evolved over time, and it has improved the buying experience of the property.
In times gone by, auctions were held only to sell repossessed houses. Both buyers and sellers were cautious of the entire auction process, but now people are becoming accustomed to understanding the hidden benefits of the auction sale and purchase.
Given below are a few of the misconceptions about the auction property:
- All auction properties are distressed
It is a common myth that auction properties are dilapidated or distressed. Only those properties that have been repossessed are auctioned, or people want to get rid of them for some sort of weird reason. But that is not true.
Though sometimes houses that are repossessed are auctioned, it does not mean that they are dilapidated or have some sort of damage or fault. Such houses are beautiful and in good condition.
The only reason why banks auction them off is that they cannot retrieve money from the party who took out a mortgage. Further, auctions are also conducted to sell luxurious properties such as villas, bungalows, commercial property, land and new construction.
- Auctions are a last resort
If an auction were not a last resort, why would a seller auction off the property? It is generally assumed that there must be something erroneous with the property. In order to get rid of it, the seller would be even ready to sell it at a lower price.
However, the fact is that a seller has chosen the auction because of multiple reasons, and one of the prominent reasons is that the seller wants to speed up the sale process. When you sell a property using a real estate broker, it might take a few months to sell it.
You never know whether the buyer visiting your property would like to buy it, or if so, is it possible to clinch the deal? It is possible that they disagree with the quote you offer and move away. But auction removes this headache. All participants will gather on the auction day, and then the deal will be closed. It ensures the certainty of closure.
Buyers are bound to clear the dues within 28 days. It means it takes just one month to sell the property. However, it requires some fees related to the auction. Whether you are selling or buying a property at an auction, it is always suggested that you consult an auction finance broker to understand how much it would cost you.
- Auction properties are always cheaper
It is assumed that properties sold at auctions can be bought at a very low price, especially if the property in question is distressed. This might be the case, but it is not always true. In fact, the distressed properties can be sold at a very high price. Before the auction is conducted, the seller sets a reserve price. It is the lowest sum that a property can be sold at. It is not usually disclosed to potential buyers. If even the highest bid does not meet this price, the seller reserves the right not to sell the property.
- The auction is suitable only for experienced investors
Although an auction is not a new way to sell a property, there are a lot of people who think that they should not participate in it as they do not have much knowledge about the auction. They fear that they can end up buying a very expensive property due to the bidding system.
This might be suitable to only those who have in-depth knowledge about the market, but the fact is that auction property can be sold to anyone. It is open to everyone, including new and novice investors. You can get advice about how the auction is to be carried out from the internet. The seller also provides information about the property and auction through a brochure to make it more accessible to everyone, especially newcomers.
- Auction bidders buy properties blind
Most of the people think that auction properties involve too much risk because they are bought blind, meaning no bidders are allowed to check the property. Based on the photo of the exterior of the property, you will have to buy it, and it is likely that you will end up buying distressed or faulty property.
This is not true at all. Auction properties are dealt with by auction brokers who are responsible for providing the entire information about the property to the potential buyers. In fact, you will get a chance to explore the property on a tour of the property.
You are absolutely free to assess every nook and cranny of the property. All you need to do is to contact the auction property broker and arrange a meeting. Before 45 days of the auction, you will get the memorandum, financial and operation statement, pictures, videos, insurance documents and purchase agreements.
The bottom line
There are several myths about auction property. If these myths are keeping you from investing in a property sold at auction, you should not let them get in your way. Before you buy a property at an auction, you should carefully examine if it meets your financial goals.
Bear in mind the finances whether you are buying a residential or commercial property at an auction. You might need commercial property finance. Consult a broker if you need any help.
Harry Kane is a financial writer and author who has covered wide topics related to business loans and finance for the last decade. He has been working as the Chief Contributor in finding out deals on various business finance products covered by Thebusinessfunds, a reputed business loan broker firm in the UK. The primary work of Harry is to analyse the loan requirements of various businesses according to their circumstances and affordability. He directly communicates with the loan aspirants and guides them to get the right loan matching their needs. He has a vast experience in finance writing, working with many major business firms in the UK. At Thebusinessfunds, Harry also used to write well-researched blogs covering the financial problems of business loan aspirants and providing relevant solutions. He is a postgraduate with MSc. in Banking and Finance.