Wednesday, June 11, 2008
1. Property auctions are held around the country, but are advertised only about four weeks before. Look in local and national newspapers or in the trade papers Estates Gazette and Property Week. Chris Coleman-Smith, the head of auctions at Savills, recommends the Essential Information Group site, eigroup.co.uk, where the sales of all 300 auctioneers in the UK are listed. He says: “Sod's law says that if you get six catalogues, the property you would really like is in the seventh.”
Don't stay local
2. David Sandeman, of the Essential Information Group, says that the best bargains can often be found when properties are auctioned outside their local area. He says: “Half the properties sold in sales in London are outside the city. And if you have a small auction house in Wiltshire selling a property in Manchester, you may not have many people bidding who know the area.”
Get a professional view
3. The auction catalogue - which you can get, often for a small fee, direct from the auctioneer - contains all the information regarding the sale, such as guide prices, viewing times and any special conditions of sale. But make sure you appoint a solicitor who will apply for and check the document pack relating to your lot. This typically costs about £25 and includes the searches and the home information pack but no in-depth survey or valuation. Coleman-Smith says you can sometimes unearth important extra information by contacting the management company or speaking to another leaseholder.
See what you are getting
4. Visit the property at one of the viewing times listed in the catalogue - and take with you a surveyor and/or builder as necessary. More experienced buyers who feel they do not need a full survey sometimes pay a reduced fee of £100 or so to these professionals to “walk through” and advise on the property. According to Coleman-Smith: “You don't want to pay £500 for a full survey, just to be told there is a bit of woodworm under the stairs.” Viewings are typically scheduled twice a week and are open to everyone, which makes them an ideal chance to check out the rivals for the property you are interested in, according to Gary Murphy, the head of auctions at Allsop.
Keep an eye on the price
5. Do remember that a guide price (which to amateurs can appear very low) is, as Coleman-Smith says, “closer to a reserve price, and may have no relationship at all to the final sales price”. A guide price can change according to the interest displayed by buyers and any offers received in the run-up to the sale. It is not always advisable to make an offer before the sale as this may push up the reserve price, but be guided by the auctioneer. Coleman-Smith suggests expressing interest in writing and asking to be informed if a property is about to sell before the auction.
Find the cash
6. Have all your finance in place before you bid - if you are successful you will be expected to pay a 10 per cent deposit on the day, which you will forfeit if you can't find the remaining 90 per cent by completion 28 days later. However, more and more sales, particularly of repossessed homes, specify completion within 14 days, Sandeman says. Your lender must be aware of - and be able to meet - the strict auction deadlines by giving you an offer of mortgage before the sale. If you can't get this in time, don't bid.
Concentrate
7. Auctions last only about three minutes per lot. Once the hammer falls in your favour you will be required to sign the contract of sale in the back of the catalogue, and pay the deposit, so make sure you know your limits - and are bidding on the right lot. If you are a novice, consider attending a sale or two as a trial run before bidding.
Bid...
8. Auctions are not for the fainthearted. If you are worried about getting carried away, take your solicitor or a friend to bid on your behalf. You can also, if you think it is better for you, bid by telephone or online. But make sure you are fully informed: pay special attention to the auctioneer's announcements at the beginning of the auction as he or she will explain the procedure and disclose any lots sold or withdrawn prior to the sale. You must also read the addendum sheet on the day, which reveals any errors or omissions in the catalogue.
...or choose not to bid
9. David Sandeman says: “Do not get emotionally attached to a property. You are buying an asset, and if you miss this one, another will come along.” Some experts say that it is not advisable to start the bidding, as this can push up the price. If the auctioneer does not get the opening bid he calls for, he may accept a lower one. But Gary Murphy advises that sometimes a bold, early bid can be successful. He says: “Your competition will sense your strength and may be spooked.”
Follow up on unsold lots
10. Look into post-auction sales. Sandeman says: “Forty per cent of properties at auction do not sell. The sellers are then on the back foot: they have not managed to sell before the auction or during it, and you may be able to negotiate a bargain. More and more properties are coming to sale, and more and more are not being sold.”
You're not alone: experts are cringing too. Some are waiting for a pop, others for more ballooning growth.
All the talk has left many wannabe buyers on the sidelines. Hey, you can still buy that home in today's market, but read today's five tips first to learn how to do it wisely.
1. Walk around town
Okay, so we talk about the housing market as if every home in the country was selling the same way. It's not. Real estate is a local thing -- and I mean really local.
Take this example: Home prices in Bradenton, Florida jumped 45.6 percent in one year, according to the National Association of Realtors. But 13 miles away, in Sarasota, home prices only rose 36 percent. And 46 miles north in the Tampa, Clearwater, St. Petersburg area, home prices only rose 15.7 percent.
The moral of the story is you'd be wise to walk around town, and investigate growth in each market. Stephen Israel, president of Buyer's Edge, a company that represents homebuyers, recommends you take a list of zip codes to the local real estate agent.
Ask them to look up the one-year and five-year change in home prices in those zip codes. Avoid any standout zip codes, like Bradenton from the example above. Places where there have been major market swings can come with falling or leaping prices, and bidding wars.
2. Think location, location, location
Let's get down to it -- real estate 101. The most important thing to look for is great location, says Israel. After that, you want to look for the best lot, and then finally, look at the home.
Goes against your instinct, doesn't it? Remember, you can fix a house. But you can't move your house into the city's best school district, push it away from a freeway, or turn your shabby neighborhood chic.
When looking at location, make sure you look at proximity to city centers, transportation, the best schools, culture, and work centers. But think it through, and take into account where you live. Living near a bus stop may be a major plus in Brooklyn, NY, but it may be a disturbance in Bloomfield Hills, Michigan.
When you're looking for the best lot, "Stay away from any major negatives," says Israel. The location and house may be great, but if there's a swampy backyard, the neighborhood looks dingy, or there are no trees on the lot, you could pay for it when it comes time for you to move again.
3. Don't show your cards
It's a seller's market. So be ready to play poker, my friends, and don't show your cards.
First off, be careful who you talk to. "Most consumers don't understand when they call number on a yard sign or speak to a person at an open house that they are talking to the seller's agent," the Massachusetts Association of Buyers Agents (MABA) warns.
The seller's agent is looking to find the best price possible for the seller's home. So don't tell them what you want to spend or what your motivations are for buying. It gives them bait to jack up the price.
And when you tour a house, be sure you don't make the so-called "$10,000 mistake" -- and exclaim, "I love this house," advises MABA. You'll pay for showing your emotion.
If you want to hire someone to be on your side, look for a buyer's agent, who can split the commission with the seller's agent in the sale. To find a list of buyer's agents, check out the National Association of Exclusive Buyer Agents, Web site: www.NAEBA.org.
4. Pay a smart premium
When you tour a house, make sure you take the time to evaluate the property correctly. Understand what the true value of the house is, and what premium is in the asking price. You're going to pay a premium in many markets because the market's hot. But just make sure you only pay a premium on a house that's worth it.
If it's a good property, it can stand up to any weakness coming in the market. "If you paid $550,000 for a home worth $500,000, you can feel okay knowing even if the market dumps, over time you'll make that 10 percent premium back just because it's a good property," says Israel.
5. Remember it's an investment
You've heard me say it: your home is probably the biggest investment you'll ever make. So treat it like one. Don't panic about the confusing current market conditions.
Israel says if you hold onto a house over the long-term, say five years, you can almost ignore the blips in the market. If your house devalues by 10 percent in the next three years, who cares, you'll probably live in it for seven, and by then, you might come out ahead.
