Insuring Auction Properties

Buying and selling property through the auction process is becoming more and more popular, particularly with the increased number of repossessions due to the recent economic downturn.

It can be a great way to increase your property portfolio but it can be risky, leading to problems and spiralling costs if you are not fully aware of all the implications involved before you buy at auction.

Some of the costs involved when purchasing an auction property include the auctioneer’s fees, renovation and refurbishment costs, buying and selling costs (solicitors) and insurance costs.

Insurance is important when buying an auctioned property. When the auctioneers hammer falls it is similar to the exchange of contracts in a regular property sale. From that point onwards you own the property and you are immediately responsible for the insurance. Any loss or damage to the structure and fittings of the property is your responsibility so it pays to protect your investment from the start.

It can be advisable to provisionally arrange any buildings and contents insurance before bidding at an auction. If you’ve already researched the type of insurance you need it will be easier to arrange immediate cover for your new property once the deal is completed. If this is not possible, get your insurance sorted out as soon as possible after the property becomes yours.

Sometimes impulse buys at auctions can prove costly or problematic. For example, if you buy a property that you haven’t inspected beforehand there could be all manner of problems when it comes to insuring your new property.

High-risk properties are often sold at auction so it is wise to make sure you look at a property yourself before bidding and get a quote to make sure it’s eligible for comprehensive cover at an affordable price.

Many buyers also choose to have survey carried out before they bid on a property to ensure they do not end up with problems such as subsidence, damp or dry rot, although this may not always be possible to arrange.

Researching the area and getting insurance quotes before buying an auction property can save you serious money. Above all, be prepared – it’s better to be fully aware of ongoing insurance costs and liabilities before you buy.

Read more in our Landlord insurance guides or get a quote now.