There are quite a few ways for potential buyers to invest in property, apart from the traditional method of enlisting estate agents, attending open houses and hiring estate agents in Leeds. In the past few years, viewing properties online has become quite common. Due to the Covid-19 pandemic, since sellers could no longer host open houses and buyers could not go house to house as freely as in the pre-Covid era, viewing properties online has become quite common. While some potential buyers view properties online and visit the few they have shortlisted, some potential buyers purchase property online. In fact, buying property through online auctions has actually also become very common in the last few years.
Now that buyers can purchase property online, the process of investment has become very easy, to say the least. From viewing properties online to hiring estate agents through websites and even buying properties through online auctions, the whole process of buying a property has changed drastically. While buying a property through an online auction does have its risks, you might even end up getting a good deal. However, some estate agents believe that buying a property through an online auction might not be the best idea. This is what the experts have to say about the downsides of buying a property through an online auction.
You will have to make large and quick payments
Usually, if your bid is successful at an online property auction, then you will have to pay 10 percent of the total sale value of the property immediately. In that case, you will need to have enough money with you to pay the deposit. Otherwise, you might lose the property. Also, once the deposit has been paid, the remaining 90 per cent of the payment usually has to be done within a month, around 28 days after paying the initial deposit. As a buyer, you will need to pay the total sale value of the property within one month, which is a hefty amount to pay! If you fail to make the payment, then you will lose the deposit as well as the property.
You might cross your budget
During a property auction; increased buyer interest leads to an increase in price. Say you went over your finances and decided to spend £150,000 on your new property. So, when the auction starts, you place a lower bid and decide to cap your bid at £150,000. However, if there is another buyer or party that is interested in the same property, then the property’s value will continue to rise. In the heat of the moment, and in order to secure your has you might end up bidding for the same property. Now, not only will you have crossed your budget, but you might find it hard to pay the total sale value, which could then burn a hole in your pocket. So, if you are planning on buying a property at an online auction, it is very important to be able to stick to your budget and not get caught up in the moment.
You might get stuck with a bad deal
Most online auctions do not allow a potential buyer to take a walk through the property, which means you could end up getting stuck with a bad property. Most estate agents agree that it is important for potential buyers to walk around a property and see the property at least once before making an investment. However, when it comes to an online auction, very few companies actually allow potential buyers to take a look at the property before an auction. So, you might end up buying a property with a leaky roof or plumbing issues, black mould in the basement or termites in the attic, and you will not know beforehand. In that case, the buyer will have to spend hundreds and hundreds of pounds on fixing the property, which could eat into their profits.
You have a small window for surveys and inspections
When it comes to online property auctions, there is a very small window for due diligence. There is only a limited period within which potential buyers can opt for property surveys, hire experts for property inspections and get in touch with solicitors to work out the legal paperwork. Due to this short time period, often some experts might miss something crucial which could end up costing the buyer thousands and thousands of pounds. For instance, your solicitors and surveyors might miss defective covenants or even restrictive covenants, which could impact your future sale plans.
You can be outbid by your competitors
If some buyer does outbid you, then you will have wasted a whole lot of time and money. Of course, with that being said, a potential buyer could possibly outbid you even while looking at properties traditionally. However, in an online auction, you are working with a time crunch so you might end up paying a little more to your surveyors and solicitors for their quick service. And, let’s not discount the time and effort that might be wasted if you get outbid during an online property auction. It is important to keep in mind that once the hammer falls, there is no turning back.
In essence, auction houses are not recommended for the average home buyer. If you are looking to buy your first home or you’re looking to buy a home for you and your family, then it might be better to approach the house buying process through the more traditional route. However, if you are a seasoned investor and you do have some experience in flipping homes and reselling properties, then buying a property at an online auction might actually be a good idea for you. In the long run, you need to remember that buying a property at an online auction is all about good organisation and efficient working. And it is very important to understand the market, do your due diligence and research the properties that are available at the auction before you make any offer. Lastly, make sure you are well educated about the auction rules and regulations before you place a bid.