How to Decide How Much to Bid
Buying at an auction is often a
much faster and easier way to own a property. However, as fast and
as easy things may appear, there are jobs that need to be done;
including setting the highest amount you are willing to pay for the
property.
Here's how to decide how much to bid...
First, once you see the property
you are interested in, call the auction house and arrange the
viewing. This way, you will be able to decide according to the
present condition of the property. Initial impression will give you
a good idea (a personal estimate), how much you are willing to pay
for the property.
Then, consult your mortgage lender and tell them about the property.
They will not lend you money unless a survey or an appraisal is conducted.
Know how much you can afford to borrow from your lender
Third, know its market value through an appraisal.
This may not give you the exact amount you are
looking for but property valuation will give you an idea on how much
you should really pay for the property.
Also factor in the deposit you
can afford. Usually, the least amount that the auction house accepts
as down payment for the property is 10% of the final sale.
Compute the possible repair cost.
Properties that are sold at auctions often come from repossession,
foreclosure and bankruptcy. So it is likely that they may not be
very well-maintained. And to make it livable, you need to do some
repairs or renovation. Hire a professional do an estimate on the
cost of the repairs. Include the cost of repairs on the highest
amount of your bid.
Take into consideration several
fees including survey fee, valuation fees, mortgage indemnity
guarantees, arrangement fees, solicitor's fees, mortgage broker
fees, lender fees, stamp duties, moving cost, auction registration
fees, insurance, auction house commissions, and the cost of selling
your previous home.
Once you have the figures from
every detail you need including the price of the property, the cost
of repair, and the extra expenses necessary to by the house, you
should be able to identify the highest amount you should pay for the
property.
Basically, determining how much
you should pay for a property at an auction is similar to setting
your budget when you buy property from an agent. The difference is,
the price is not definite and will depend on other participants at
the auction.
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