Property auctions can be a great place to pick up a bargain, but they also carry the risk of you walking away owning a building that suffers insurmountable problems.
There tends to be a bit of a mystique surrounding this purchasing method, with many believing it’s only suitable for experienced investors or developers. In reality, anyone can successfully buy a house at auction, provided they understand both the process and the potential pitfalls.
Some people worry that houses sold under the hammer must have something wrong with them, but this is not necessarily the case, as dwellings are put to market in this way for a variety of reasons. It might be that the property is hard to value, that the vendor needs to be seen to be achieving the best price, or that the owner is in a hurry and wants the certainty of a quick sale.
Estimating the market price of certain houses can be difficult (especially those in poor condition, situated on contaminated land or on plots with restrictive covenants) so selling at auction is a good way to find out what the market would pay.
You may also come across some more unusual buildings, such as chapels, water towers or public lavatories ripe for conversion, which are complicated to value accurately. Charities, trusts and some public bodies have to be seen to be getting the best possible price for the dwellings they sell, and auction helps them to achieve a transparent result – this is also the case for mortgage lenders selling repossessions.
Auctions are not just helpful to vendors. Buyers can avoid the uncertainty of gazumping and long chains. Purchasing in a public process offers the added comfort of knowing exactly how much the bid below yours is.
The process for the buyer starts with the publication of an auction catalogue. This presents the houses and plots for sale along with guide prices, property information and terms for purchasers. It should also provide a link to a legal pack you can access online, which will set out the elements of the title and any restrictions, conditions of sale and accompanying planning details.
At the auction itself the fall of the hammer marks an exchange of contacts, triggering the need for the deposit payment plus a buyer’s premium. The sale then completes at a pre-prescribed date – usually 28 days after the auction. An essential point to recognise is that a winning bid is a successful purchase; you have committed to buy as soon as the hammer falls. You may also be able to make an offer to secure a house before the event, or you can make a bid afterwards if not sold.
There are a few elements to prepare prior to entering the auction room. You must have a solicitor lined up – and possibly a surveyor – so you can get the necessary professional inputs in good time before the event date.
If you’re buying a plot or conversion opportunity, you may also need to seek advice from a planning consultant or architect to understand a site’s suitability for what you want to achieve and the likelihood of gaining permission. Importantly, you must have your source of finance secured and the deposit ready to be paid on the day in case you achieve a successful bid.
Always keep close tabs on where and when auctions are coming up in your area. There is a limited time frame between the catalogue’s publication and the event itself, so you can’t afford to be a latecomer. You might want to attend a few auctions without the view to purchase, purely to get a feel for how they operate. It’s also worth reading various catalogues and legal packs for conditions of sale to ensure that you thoroughly understand all the normal small print.
Once you find a suitable looking property in a catalogue, arrange a viewing as early as you can. If it’s going to be a renovation or conversion project, get a surveyor or contractor to come with you to assess the building’s structural condition. If it’s a plot, find out all you can from the agent about the site’s planning permission and look at the council’s website to see its planning history.
There will be no time to secure consent for a new design prior to the auction itself, but you may be able to get pre-application advice from the local authority. Alternatively, assess the prospects for success by speaking with a planning consultant. You will also need to pass the legal pack onto your solicitor and make sure they are happy with all aspects of the sale.
It’s crucial to keep a close eye on upcoming auctions to ensure you don’t miss out. Resources worth perusing include:
Allsop Established in 1906, this renowned auction house provides a host of useful information and advice online.
Auctionmove This website offers online auctions with a live interactive bidding service.
Countrywide Property Auctions The company holds events in London, Sheffield and Exeter.
Essential Information Group Working closely alongside over 450 different auction houses, this site provides detailed information about property auctions across the UK.
UK Auction List Providing a database supplied directly by auction houses across the UK, you can search a comprehensive list of properties being sold.
If the property meets your needs, you must draw up a realistic budget so that you go into the auction certain of your maximum bid price. You also need to discuss the potential purchase with your lender to ensure you have the funds available to complete at the prescribed time post-auction. It’s worth noting at this stage that guide prices are often set low to entice buyers.
You’ll need to register your intention to bid, either in advance or at the auction itself. Essentials to bring along with you to the event include your ID, a means to pay the deposit and the details of your solicitor.
Once you’re in the room, sit somewhere where you can clearly see the auctioneer and vice versa. The front might seem sensible, but bear in mind that you won’t easily be able to see who else is bidding from this position. It’s not unusual to find serious potential buyers at the back or sides of the room, to comfortably survey the competition.
When it comes to placing a bid, make a clear sign by raising your hand or waving a copy of the various auction particulars. Some events will use numbered cards or paddles, which you can pick up when you register.
Subtle movements such as twitching your eyebrows or scratching your ear might work in the movies, but are unlikely to impress an auctioneer in reality.
You can also take part via the telephone if you’ve got someone there in your place or you could put a written bid in before the event. Both will require the auctioneer’s consent. The atmosphere can become exciting and sometimes results in enthusiastic bidders getting carried away. Arm yourself with your maximum price limit and don’t go beyond it. Be aware that houses are frequently offered with a minimum reserve cost; the auctioneer might indicate when this price has been reached.
If you’re successful, there will be a memorandum of sale to sign, the deposit and buyer’s premium to pay and insurance to arrange, as you’ll be liable for the property or plot from the moment you are contracted to purchase. Notify your solicitor of your purchase immediately so that you can complete within the deadline.
When buying at auction, achieving a successful result is all about careful planning and not wild speculation. The methodical researcher can sort the genuine potential from the problematic plots and (with a bit of luck on the day) snap up a winning project at a bargain price.
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