Why Buy at Auction?
It is a little known fact that there
are over 400 property auctions held in the UK every year. Through these
auctions over 26,000 properties are sold.
The type of properties sold at auction
varies greatly, from large country homes to run down inner city
terraces.
However, what they all have in common
is the fact that they are not widely advertised to the general public,
which is why some great bargains can be had. Some properties are entered
into an auction due to their individuality - so consequently they are
difficult to put a true valuation on them.
The vendors of these properties are as
varied as the properties themselves. From the executors of a deceaseds’
estate, to banks that have repossessed houses.
By selling at auction a quick easy sale
can be achieved instead of the property lying empty for many months.
The advantage for buyers is that there
is no gazumping and no jittery vendors to contend with who may be trying
to decide who they would like to sell to. If a property is sold at
auction it goes to the highest bidder... if that's you, once the hammer
falls the house is yours!
Before the
Auction
We would strongly advise that the
inexperienced visit an auction on possibly several occasions before
buying. Auction rooms can be intimidating places on the first visit and
these early visits can prove valuable when one finally decides to buy!
1
Firstly we would recommend that you decide how much you can
realistically spend on a property. You will need at least funds
available to pay the deposit, this is usually required on the day of the
sale. It is wise to check with the auctioneer which payment options are
acceptable.
Any further funds required for the
purchase of the property also need to be in place prior to the auction,
as legal completion on the property is usually 28 days after the auction
date. If you need finance, there are many specialist lenders who will be
able to help you.
2
Spend
time on our web site studying the properties that are available.
Remember that new properties are added daily, so do not rush into buying
the first property that you see. Try not to restrict yourself to only
very specific properties, because as in buying of all property,
compromise is often the name of the game.
3
Once you have identified possible properties, contact the relevant
auctioneer directly. Try to get as much information as possible in
regards to the property. It is a good idea to ask to be updated with any
new information that they may receive. Information received at this time
may well result in savings in professional advice in the future.
4
Viewing of the property usually has
to be made directly through the auctioneer. In certain cases auctioneers
hold "open days" on specific days when you will be able to
view the property. Spend as much time as possible in the neighbourhood.
A quiet area on Sunday lunchtime may not be as peaceful come Monday
morning!
5
If required, and this is strongly
recommended to the novice, advice should be sought from property
professionals such as surveyors as to the structural state of the
property.
6
Instruct a solicitor, preferably one with experience with handling
auction property purchases, to inspect local and national searches etc.
They will no doubt wish to see a copy of the auction catalogue,
available directly from the auctioneer, for the conditions of sale and
any onerous conditions.
7
Check the methods of payment that is acceptable by the relevant
auctioneer. The majority require a 10% deposit, but this is usually
subject to a minimum amount. This must be verified prior to the auction
date.
8
As stated earlier, visit an auction before you intend to purchase. If
possible, position yourself where to you can "watch the
professionals in action." There may well be many people present who
will be able to offer help and advice to the newcomer.
9
You would be ill advised indeed to purchase a property at auction when
that purchase was dependant on the sale of any existing property.
10
As in any property purchase, it is the purchasers responsibility to
insure the property upon completion. At auction the purchaser is usually
responsible for the insurance "upon the fall of the hammer."
Consequently suitable insurance will need to be arranged before the day
of the auction.
11
It is not unusual for properties to be sold prior to the auction date.
For many reasons vendors may well accept offers below the price quoted
on the property details.
12
The guide prices given with the
property details are the prices that the auctioneer expects the property
to sell for given the prevailing market conditions. The reserve price,
usually the lowest price the vendor will accept, may well be
considerably below this - A VERY IMPORTANT POINT!
The Day of the Auction
1
If possible arrive early at the auction! It is not recommended to arrive
"stressed" as this may effect your judgement. If you have any
queries simply ask the auctioneer, the staff are usually very
approachable and helpful. Ask for a copy of the addendum for any changes
in the property details.
2
It is a good idea to get yourself a good position which will enable you
to see all the bids that are made. It has been known for a bidder to be
actually bidding against himself! Do not worry about making a bid
inadvertently, auctioneers can usually tell the difference between a
bonified bid and the scratch of a nose. If a mistake does occur, tell
the auctioneer straight away, do not wait until the end of the sale.
3
When the lot that you are interested in comes up, the auctioneer usually
states the address of the property. Make sure that this is the Lot you
wish to bid on - It has been known for people to bid for lots contained
in other auction catalogues.
4
For the more excitable people it
may be advisable for your solicitor/surveyor to bid on your behalf. This
will ensure that you do not get carried away and exceed your limit. A
great deal of discipline may be required here!
5
It is usual for most properties to be subject to a reserve price below
which the auctioneer cannot sell the property at auction. It is usually
made clear at the onset that the property is being sold subject to a
reserve price in the catalogue or the conditions of sale, although the
reserve price is not usually disclosed. Please bear in mind that the
auctioneer will use all his experience to reach the reserve price at the
earliest time.
6
When attending a sale, bid for your preferred property up to your limit,
but not beyond the top price that you have set yourself. Remember there
will usually be another suitable property at a later date.
7
When the auctioneer's hammer falls and you are the last and highest
bidder, you are then the successful purchaser and as such are legally
committed to the pay the price that you bid and consequently complete
the purchase of the property.
8
As the auction forms a binding
contract the vendor must also complete the sale on the day under the
terms and conditions stipulated in the contract. A higher bid cannot be
accepted after the hammer has fallen.
9
Immediately after the sale you will be expected to contact the
auctioneers staff to complete the necessary paperwork. They will require
your full details and those of your solicitor. These will be used to
prepare the Memorandum of Sale that you will be required to sign. The
vendor's part of the contract will then be given to you, which you
should immediately pass onto your solicitor.
10
At this time you will also be required to pay the deposit, normally 10%
but again this point must be confirmed prior to the auction. Many
auctioneers will present your cheque for special clearance, so you must
ensure that the necessary funds are available.
11
As you will be responsible for the insuring of the property upon the
signing of the contract it is advisable to contact your insurers to
confirm all relevant details.
12
If the property did not reach the reserve price it is still possible to
purchase it. Register your interest with the Auctioneer before leaving
the saleroom. Indeed should the vendor be present, this maybe the ideal
time to strike a deal.
If you have any doubts or
concerns regarding the purchase of any property - do not buy. Cavet
Emptor - buyer beware, carries no greater weight in the property market
than at auction. YOU HAVE BEEN WARNED!
This Guide has been produced
by ITL and is intended to provide the basic advice to buying at auction.
ITL would advise all buyers that specific details and enquiries should
be checked with the specific auctioneer concerned prior to the sale.
Financial advice should always be sought from a professional financial
advisor.
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