- It enables you to buy a Property often at below-market price (can be as much as 30% below market price).
- It cuts out the delay of the usual conveyancing chain of buyers and sellers.
- It carries the certainty that once you have agreed to buy the Property – it’s yours – the seller cannot pull out.
- It's quick, all bidding and buying processes are completed on the same day.
- You will avoid being gazumped – unlike the usual estate agency route, the auction process is transparent and you will be aware of all the other bids on the property; when the hammer goes down the decision is final and no other bids are accepted.
Like all auctions though it carries risk:
There is very little time to research the Property
The Property is sold as seen – there are no remedies against the Seller if the Property has issues and is not what it seems.
- The majority of the properties are those that would not normally sell on the open market, examples being un-modernised local authority or housing association stock or abandoned houses; generally properties sold at auction require a lot of work.
- You will always need to have at least a 10% deposit
Buying at auction can be very risky if you do not prepare thoroughly before hand. Once the hammer has dropped and you have won your bid you are legally committed to purchasing that Property and if the Property has serious issues you could be lumbered with a costly white elephant and thousands of pounds out of pocket.Research
Check out where all the property auctions are going on and just attend a few and watch. Get to know the process and watch the bidders – learn the game. Auction houses generally have mailing lists which enable you to keep in touch with when property auctions are being held.
Get a copy of the auction catalogue these are usually available weeks in advance. Make a list from the catalogue of the properties you are interested in and attend the viewings.
Having narrowed down to one or two properties that you are interested in the next step is to research the property and the area comparing the details with the information in the catalogue to check its accuracy. A good tip is to check online and with the local estate agents as to the cost of comparable properties in the same area/street- make sure that you have a clear idea as to the market value of the property you are bidding on this will enable you to avoid bidding too high.
Order the auction pack for the Property from the auctioneers – these contain all the information about the Property from the Sellers solicitors.
Make the usual searches with the local authority, water & drainage, environmental etc – although copies of these searches are often in the auction pack for the property.
If the property is old and in disrepair or described as ‘in need of updating or modernisation’ – beware get a full structural survey carried out – this may cost around £500.00 -£800.00 however in light of a recent case whereby the local authority condemned the property after the auction and had it demolished, leaving the buyer with no property despite a liability to pay for the property and a bill for the demolition – it will be a £500.00- £600.00 well spent.
Make sure that you are familiar with the terms and conditions of the auction which will be printed in the catalogue. It is advisable to always get legal advice about the Property from a solicitor or conveyancer and if need be, a surveyor.Finance
You will need 10% of the purchase price on the day of the auction and will have to pay this, along with auction fee and contract fee (which can be around £600.00 to £700.00 + VAT )on the day if you win the bidding for the Property. You will then have 28 days to pay the remaining 90%. Auctions do not usually give any lee way – if you do not have the finance on the day you do not get the property and may also have to pay damages as the property will have to be relisted.
If you will require mortgage finance, it is prudent to ensure that you have a ‘mortgage in principal’ before attending the auction. If you do not have the finance to pay the remaining 90% at the end of the 28 days, you will lose your deposit and again may have to pay the auctioneer’s costs and damages to the Seller.
Failure to complete within the 28 days after the auction date may mean you will have to pay the cost of re-listing the property and any shortfall between the price that you agreed and the price that the property eventually sells for. You will also be charged daily interest from the date that the property should have been sold until the date it is actually sold.
Always keep at the front of your mind that once you win the bidding for the property you are legally bound to purchase the property.
Always be clear as to how much you can afford and the maximum you are prepared to bid up to and stick to it. Getting carried away and bidding over your maximum can leave you in serious and costly trouble , especially if your bid exceeds your mortgage offer.Step 2: Attending the Auction
Always arrive early giving yourself time to get familiar with the auction room layout and where everything is ; once the auction starts it is usually fast moving and you will need to be relaxed and able concentrate with a clear head- arriving late and flustered is a recipe for disaster.
You will need to register with the auction house on arrival and have two forms of identification and all your banking details with you along with a method of payment such as a bankers draft or cheque book. You will not normally be allowed to bid unless you have registered on arrival.
When registering ask for the addendum sheet- this will give details of any alterations and any information that has been added since the publication of the auction catalogue. It will also give details of any properties that have been withdrawn from the auction or which have already been sold.
Arriving early at the auction will give you more choice of seating. When choosing where to sit try and choose a place from which you can see who is bidding and most importantly from where the auctioneer can clearly see you bidding.
When making a bid, make sure that your gestures are clear and will catch the auctioneers attention – raise your hand or nod or shake your head clearlyStep 3: Conclusion of the Auction
The auctioneer will always let everyone know when he is concluding the bidding. If you have won the bidding you will have to pay the auction fees and 10% deposit to the auction house. From the moment the hammer has fallen – you will be legally bound to buy the property.
If the reserve price has not been reached – make sure that the auctioneer has your contact details and is aware of your interest as there may be a chance that the Seller may be willing review the reserve price, in which case the auction house may contact interested bidders and offer the property to them.
Completion of the Sale is usually around 28 days after the day of the auction. However this may be sooner – so it is important to check the conditions of sale in the auction catalogue or the special condition of sale in the legal documentation.