Advantages and Disadvantages to Buying at Auction
There are many advantages for buyers to buying at auction, principally:
1. Access to BMV properties that would be difficult to pinpoint on-line.
2. Easier to spot the signs of a motivated seller at auction.
3. Auctions grant inexperienced buyers access to distressed or impaired assets directly from the bank.
4. Auctions are the most reliable way to establish market value, in the absence of a national property price register.
5. Auctions provide much needed transparency on property prices achieved, which is crucial for the Irish market.
6. Where a property fails to attract bids at auction or fails to achieve the sellers reserve price, buyers have a great opportunity to secure a bargain post auction.
There are disadvantages for buyers and pitfalls that they need to be aware of, namely:
1. The AMV might well be strategic. i.e. a low AMV might not be indicative of market value but rather used to attract interest in the property.
2. There are massive amounts of preparation that goes into a finding and researching a property.
3. As any pundit will know, buying property is always subject to risk, always. What varies is the level of risk and how the buyer protects against it. Buying property through auction does present a higher level of risk for buyers.
4. The bidding is unconditional; it cannot be made dependent upon the sale of an existing home or subject to mortgage.
5. Where a bid is successful, the buyer is obliged to proceed with the purchase. The contracts for sale are signed on the day of the auction and legal deposit handed over, usually 10 per cent of the agreed price. In contrast to this obligation, the seller has a legal right to withdraw at any stage in the process before hammer falls.
6. Finally, the greatest pitfall for unprepared buyers is that they might actually be successful in their bid and secure the property but not be in a position to complete the transaction within prescribed period of 28 days. If this happen, the buyers should consult with their solicitor as soon as possible.
If you have any queries about the upcoming property auction or required attendance and bidding services, please do not hesitate to contact firstname.lastname@example.org or tel. 01 4428 035.
~MD of Buyers Broker Ltd and author of the Irish Property Buyers Handbook 2011