What type of properties are sold at auction?
The advantage of auctions is that they ensure a quick sale. For that reason, auctions are a preferred method of sale for rundown properties, repossessions, properties that are difficult to sell and those with development potential.
Mortgage lenders, local authorities and housing associations may have a substantial number of properties on their books. It can be financially beneficial for them to sell through auction, recouping their money without the drawn out processes and costs of an estate agent.
For the same reason, sellers who need quick cash or have struggled to sell via an estate agent will turn to an auction to finally turn their bricks and mortar into cash.
Should I buy at auction?
Auctions are not for the faint-hearted but if you have your finances in place, work quickly and are prepared to do your research it is possible to pick up a property for less than its market value.
On the other hand, if you don’t have your finances available, cannot quickly coordinate your surveys, conveyances and valuations or simply don’t make good decisions under pressure, don’t set foot in an auction house. Standard practice at auction houses requires a deposit of 10% of the sale value which is due on the fall of the hammer, with completion required four weeks later. Lack of research or finance could leave you in dire straits.
The recent surge of interest in property development and investment has increased the amount of people using auctions to buy property. Such competition inevitably means auction sales can often achieve higher prices than private sales.
For London auctions, subscribers to propertyrenovate.com can use our auction calendar. This is part of our membership service and lists forthcoming residential property auctions taking place in London. Once you’ve found a suitable auction, visit the auctioneer’s website. This should contain everything you need to know about their upcoming auctions. Having pinpointed a suitable auction, request the catalogue of properties or “lots”. A handful of auctioneers still charge a small fee for a catalogue to be issued. The majority now allow you to download a copy online or view the list of lots on their website. The catalogues generally become available 2-3 weeks before the date of the auction.
Before the auction
Read the catalogue thoroughly and familiarise yourself with the following information:-
- Lot Number
- Property Description
- Guide Price
- Important Notice to Bidders
- Memorandum of Sale
- General Conditions of Sale
The guide price can change at any point before the auction, hence the importance of staying in touch with the auctioneer right up until the auction day itself. The guide price is purely the auctioneer’s indication of what the price might reach and generally the property sells for more than the guide price. The guide price is not to be confused with the reserve price which is the lowest price the vendor will accept.
Property viewings are usually arranged as block viewings on designated days. Contact the auctioneer for times and dates. Take the catalogue with you and request any further information the auctioneer may have as part of a “homebuyer’s package”.
If you are interested in the property, you should instruct a chartered surveyor to carry out the necessary survey and your solicitor to carry out the required searches on the property. You will also need the Legal Pack and any special conditions of sale from the seller’s solicitors.
You must obtain all this information in plenty of time to allow you to determine a) if you wish to bid for the property, b) how high you are prepared to bid and c) if you will have the finances in place.
If you or your solicitor cannot attend the auction in person, there is usually the possibility of proxy, telephone or internet bidding. Discuss these options with the auctioneer.
Finally, before the auction day arrives ensure you know the procedure for registration, ID requirements, paying the deposit, signing the Memorandum of Sale and the responsibility of insurance for the property once the hammer falls.
The best way to familiarise yourself with an auction room is to attend one. See how bids are placed and how the auctioneer controls the room. The auction day can be a tense experience for bidders, but being aware of the process should help to settle some of those nerves.
You should arrive early with the required forms of ID and complete any registration requirements. Your solicitor or surveyor may be allowed to attend on your behalf.
Ensure you pick up a copy of the Addendum sheet which lists any late alterations, guide price changes, withdrawals or prior sales.
When bidding, make yourself clearly visible to the auctioneer and indicate your bid with a nod of the head or raised hand. If you are the successful bidder at the fall of the hammer, a member of the auctioneer team will approach you to complete the paperwork.
Remember a deposit of 10% will be due immediately, and standard procedure is for the remaining 90% to be submitted within 4 weeks.
Prior sales and unsold lots
The addendum sheet can list several lots that have been sold prior to the auction day. It is quite acceptable to place an offer on a property before the auction date itself but only if you are in a position to complete the sale. The vendor is under no obligation to withdraw the property from the auction until contracts have been exchanged.
Vendors may also have placed a reserve price on their property. The auctioneer will announce whether this has been reached at the end of the bidding. Again, the vendor may be willing to accept a bid after the auction, in which case you should leave your details with the auctioneer who will discuss them with the vendor.
Five top tips to remember:-
1. Decide on your budget and stick to it
2. Stay in regular contact with the auctioneer
3. Familiarise yourself with the whole auction process before you make any bids.
4. Research every detail you can about the property using reliable professionals
5. Minimise all risks as once your bid is accepted you have entered into a legally binding contract.